Abstract

Using a transaction price database, in this paper we evaluate the economic effect of abandoned and derelict real estate areas on housing prices in Milan Italy from 1993 to 2016. We find that brownfields are widespread throughout Milan, with larger abandoned and derelict areas prevalent in the suburbs. Standard hedonic price models show that nearby brownfield areas lower housing prices, with stronger effects for larger derelict and abandoned areas. Economic losses are more relevant to houses in the historical city center and are affected by real estate market trends.

Highlights

  • The value of housing units depends on the asset characteristics and the set of amenities available for users that may affect the willingness to pay for a buyer (i.e. Rosen, 1974)

  • In order to measure the contribution of brownfield areas proximity on the rent and prices for the housing sector, the analysis considers the hedonic price model proposed by Rosen (1974) and evaluates the price effect net with respect to any effect related to different unique feature of each real estate unit

  • The negative effect on prices in the housing sector is clear due to the effect of brownfield areas on the quality and the type of services that could be available for citizens living in the area

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Summary

Introduction

The value of housing units depends on the asset characteristics and the set of amenities available for users that may affect the willingness to pay for a buyer (i.e. Rosen, 1974). The existence of brownfield areas in a city requires to plan an intervention by the public authority in order to avoid the negative effects in the long run related to their concentration outside the downtown. In such scenarios the demand of real estate in the city centre is expected to decrease over time due to the increase of the quality of transportation that reduces the transportation cost for individuals and increase the probability of having new dismissed areas (BenDor, Metcalf e Paich, 2011). The reduction of the demand nearby brownfield areas has a potential effect on the price and rent for the housing sector bure there are no empirical evidences on the economic losses for owners nearby derelict or abandoned areas or properties

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