What are the effects of contamination risks on commercial and industrial properties? evidence from Baltimore, Maryland

Abstract

Using the hedonic pricing approach, this paper investigates how the information released on public registries of contaminated and potentially contaminated sites affects nearby commercial and industrial properties in Baltimore, Maryland. The study found that industrial properties are virtually unaffected by proximity to a site with a history of contamination, while commercial properties do suffer an external cost due to the proximity to a contaminated site. This external cost is not cleared once the site has been cleaned up or has been pronounced to be harmless. It also found that the impacts of urban economic development policies, such as Empowerment Zones and Enterprise Zones, have had positive effects on industrial property values, but less so on commercial properties. In sum, brownfield properties in Baltimore are not particularly attractive investments for developers, and there is little potential for self-sustaining clean-up based on appropriate fiscal incentives, such as Tax Increment Financing. It is doubtful that ‘one size fits all’ measures to encourage the clean-up of contaminated sites can be successful in this context.