Valuation of education and crime neighborhood characteristics through hedonic housing prices

Abstract

This article studies households' valuation of neighborhood amenities through analysis of housing as a bundle of structural and neighborhood characteristics. Using statistical techniques, hedonic prices, or incremental values in the market, can be imputed to each element of the bundle. Twelve variables describe neighborhood crime; twenty-one variables describe neighborhood schools. Together with structural variables, they significantly and substantially explain house prices in the Baltimore metropolitan area. The technique is also shown to provide a market framework for approximating the benefits of localized neighborhood improvements.