Recreation Benefits of Neighboring Sites: An Application to Riparian Rights

Abstract

Travel cost methods cannot be utilized in deriving welfare benefits to households who reside adjacent to recreation sites, for they have direct access to site benefits at virtually zero cost. Hedonic theory is applied to a housing market that abuts Hyco Lake, NC. The linear feet of shoreline is the unique attribute that localizes the lakeshore housing market from others. Regressing the annual rental prices of lakeshore homes on lot and housing attributes, the shoreline coefficient is positive and significant. Since we are valuing the localized benefits of a lake, we interpret the shoreline coefficient as the marginal benefit of riparian rights per household and use this value in computing recreation benefits.KEYWORDS: Recreation resources, recreation economics, recreation modeling, hedonicsIntroductionDetermining the willingness-to-pay by households for recreation sites is important in guiding public policy and in designing land use policies (Freeman, 1979). However, there is no market through which public recreation sites can be valued by analysts. Lacking a price with which to value site benefits, the use of indirect techniques are required to estimate the recreation demands and compute welfare benefits (Mendelsohn, 1987). For example, travel cost methods involve computing a price of a site's services when both travel distance and the opportunity cost of travel time per trip are measur able. But what about the localized benefits from a recreation site where the travel costs of entry are virtually zero for adjoining property owners? If the benefits are observable, hedonic property value techniques appear to be well-adapted for studying the welfare benefits to households (Brookshire, Thayer, Schulze, & d'Arge, 1982; Brown & Pollakowski, 1977; Mendelsohn, 1985). We estimate the benefits of riparian rights for households whose properties abut a privately owned apron of land around Hyco Lake in north central North Carolina. Lakeshore property owners are given riparian rights to the lake with the permitted construction of boat-houses, ramps, and piers, and other indirect benefits such as the clearing of trees and shrubs for direct scenic views, and weather moderating effects. The riparian rights are viewed as localized recreation benefits by lake developers, a concept supported by Clark and Downing (1985) who found that households placed a high value on water-oriented amenities and riparian rights, whether at lakes, streams, or marine locations. Although not the focus of this paper, property owners can also incur localized externalities (e.g., noise, ground litter) due to the kinds of activities and ensuing conflicts that occur when other visitors cannot be excluded from public area use.In past lake studies, Knetsch (1964) compared property values to the presence or absence of a lake or reservoir. David (1968) compared shoreline property values to lake quality characteristics, and Burby (1971) studied factors affecting residential locations in reservoir recreation areas. Information on riparian benefits from this study can be used by power company officials as an input into their deliberations on a proposed change in current policy at a distant lake to allow for the transfer of riparian rights to lakeshore property owners.Hedonic TheoryThe expanded uses of hedonics began in 1961 with the first of many papers to examine the transportation-saving aspects associated with alternative residential locations (Mohring, 1961), and later the behavior of prices for durable consumer goods and quality changes over time (Rosen, 1974). More recently hedonic theory has been applied to the study of environmental degradation of recreation resources and residential property (Wilman, 1984). Studies completed on the potential changes to the quality of recreation sites included water (Bouwes & Schneider, 1979), hunting (Livengood, 1983), and fishing (Clark & Kahn, 1989). Examinations of the positive capitalized effects of various recreation amenities on property values have included parks (Weicker & Zerbst, 1973), greenways (Correll, Lillydahl & Singell, 1978), schools and park-schools (Hendon, 1973), water parks (Darling, 1973), and open space (Curtis, 1993). …