A comparison of noxious facilities` impacts for home owners versus renters

Abstract

The siting of noxious facilities, such as hazardous waste facilities, is often vigorously opposed by local residents, and thus it is now common for local residents to be compensated for the presence of the facility. One technique that has been employed to implicitly value noxious facilities is the intercity hedonic approach, which examines the wage and land rent premia between cities that result from the presence of the facility. However, most of the focus has been on the behavior of home owners as opposed to renters. Since these two groups of residents vary on numerous dimensions such as marital status, age, sex, and personal mobility, it would not be surprising to find different marginal valuations of local site characteristics. The authors use 1980 Census data to derive separate estimates for owners and renters of the implicit value placed on eight different types of noxious facilities. They find that renters and owners differ in their response to noxious facilities, although the differences are not systematic. Furthermore, the differences between owners and renters are not primarily due to differential mobility or socio-demographic factors. Controlling those factors decreases the differences between renters` and owners` implicit valuations of noxious facilities by less than 10%. Unmeasured differences between the two groups, such as tastes, risk aversion, or commitment to the community, must account for the remaining difference in valuations. These findings suggest that policymakers should separately consider the responses of owners and renters when estimating noxious facility impacts.