Proximity to a Water Supply Reservoir and Dams: Is There Spatial Heterogeneity in the Effects on Housing Prices?

Abstract

An understanding of the spatial variation in the impacts of living near reservoirs, dams, and undevelopable land is important in explaining residential property values. While there is a body of literature on the effects of proximity to dams and reservoirs on housing prices, little known research attempts to determine if various individual houses are impacted differently depending on their locations and years of sale. We examine properties in Barkhamstead, Connecticut that sold between 2001 and 2015. We utilize non-parametric regression techniques to allow for the possibility that the major reservoirs, dams and undevelopable land areas, affect various house prices differently, depending on their locations and when they are sold. We find that for the most part, proximity to dams leads to lower housing sale prices, with the magnitudes of these effects varying across geographic space and over time. A difference-in-differences approach indicates that the willingness to pay for distance from the dams decreased after the most recent housing crisis. In general, undevelopable land area is valued as an amenity in this rural town. The signs of the effects of proximity to the reservoir vary - some properties benefit from proximity while others experience lower sale prices when they are closer to the reservoir. We also control for other key housing characteristics and environmental variables, such as elevation, numbers of bedrooms and baths, age of properties, year of sale, square footage and acreage, and others. We generate maps of the signs and magnitudes of the coefficients for several of the key variables to illustrate the spatial heterogeneity.