Valuing water quality in the United States using a national dataset on property values

Abstract

High-quality water resources provide a wide range of benefits, but the value of water quality is often not fully represented in environmental policy decisions, due in large part to an absence of water quality valuation estimates at large, policy relevant scales. Using data on property values with nationwide coverage across the contiguous United States, we estimate the benefits of lake water quality as measured through capitalization in housing markets. We find compelling evidence that homeowners place a premium on improved water quality. This premium is largest for lakefront property and decays with distance from the waterbody. In aggregate, we estimate that 10% improvement of water quality for the contiguous United States has a value of $6 to 9 billion to property owners. This study provides credible evidence for policymakers to incorporate lake water quality value estimates in environmental decision-making.

Spatial Heterogeneity in Hedonic Price Effects for Lake Water Quality

“…Further, Zhang, Phaneuf, and Schaeffer (2022) and Swedberg et al (2022) studies observe heterogeneity in value estimates at the Regional and State levels. Within a national housing market framework, Mamun et al (2023) observe spatial heterogeneity by state and ecoregion, while Moore et al (2020) do not find evidence for heterogeneity at the state level. Given the small number of studies considering large spatial scales for hedonic models of lake water quality, this is an issue that deserves further investigation.…”

“…[Insert Figure 1 here] Spatial heterogeneity can also be investigated with the hedonic model by the inclusion of interaction terms between water quality and dummy variables the spatial boundary of interest. Moore et al (2020) and Mamun et al (2023) both consider national models with state interaction terms. In addition to administrative boundaries, other characteristics may also be important to consider when determining spatial boundaries.…”

“…Swedberg et al (2022) at the State and Substate levels. Mamun et al (2023) and Moore et al (2020) both consider a larger spatial scale using a "nationwide housing market" comprised of lakes from 43 and 32 states, respectively. These studies help policy makers understand the effects of lake water quality regionally and nationally.…”

Introduction to the Special Issue: Property Value Analysis Using ZTRAX. Applications under the Approaching Sunset

“…Swedberg and colleagues consider inland lake water quality, Chen and Towe examine coastal amenities and flood hazard, and Chaudhry, Fairbanks, and Nolte look at water markets for agriculture. The starting point for Swedberg et al is recent studies (e.g., Guignet et al 2022;Mamun et al 2023) reporting national average willingness-to-pay estimates for inland lake water quality. These national averages likely mask considerable heterogeneity based on variation in ecological and local market conditions.…”

Data Practices for Studying the Impacts of Environmental Amenities and Hazards with Nationwide Property Data

“…Contributors to this article have used ZTRAX data to estimate: the cost of land acquisitions for conservation purposes (Nolte 2020); property value effects of national parks and historic sites (Zabel, Nolte and Paterson 2024); the benefits of lake water quality (Mamun et al 2023;Swedberg et al 2024); the effects of water markets on agricultural land values (Chaudhry, Fairbanks and Nolte 2024); the cost of hazardous chemical releases and the benefits of subsequent cleanups Guignet et al 2024); the risk of flood damage to residential homes (Gourevitch et al 2023); the effects of flood insurance policies (Hennighausen et al 2024;Pollack et al 2024); and property value impacts of critical habitat under the U.S.…”