Hedonic Property Value Research Articles

Hedonic property values and water quality: A meta-analysis of commodity, market, and methodological choices

This study quantitatively reviews the hedonic literature examining surface water quality to assess how attributes of the commodity, housing market, and methodological choices lead to variation in the significance and expected sign of the estimated property value effects (i.e., elasticities). We conduct a meta-analysis of 29 studies with 290 unique estimates, published or released between 1985 and 2017, and find evidence based on probit meta-regression models that some of the definitions and decisions made in primary studies do influence the estimated relationship between water quality and home prices. Our most robust evidence suggests that methodological choices (e.g., accounting for spatial dependence, or if the water quality measure was based on something other than in situ measurement) have a critical role in determining the likelihood of finding a significant and theoretically expected result; and perhaps most importantly, it is not always selections that reflect best practices that lead to this finding. This study can help identify potential concerns with data and modeling choices in the collective hedonic literature focused on water quality.

Tree cover and property values in the United States: A national meta-analysis

Our meta-analysis uses 21 hedonic property value studies and 157 unique observations to study the influence of tree cover on the value of homes in the United States. We construct elasticity estimates of the percentage change in home value for a 1% change in the percentage of tree cover around a home. Cluster weighted averages of the elasticities account for the housing market and the precision of the property price effects for tree cover on and off property and for three categories of tree cover density. Meta-regression models further control for the housing market and tree cover heterogeneity, the methodological techniques of the primary study, and publication bias. The Mundlak meta-regression model with controls for US regions has the lowest out-of-sample transfer error. The larger elasticity for off property tree cover than on property tree cover (unless tree density is 10% or lower) suggests that the property value of homes rises more if tree cover is not on land that homeowners are responsible for maintaining. The elasticity in neighborhoods with greater than 25% tree cover (0.013) is four times larger than the elasticity in neighborhoods with 0 to 10% tree cover (0.003).

Comparing Pollution Where You Live and Play: A Hedonic Analysis of Enterococcus in the Long Island Sound

Hedonic property value studies of water quality conventionally focus on water quality levels measured nearest a home. This study examines whether water quality at the nearest access point (i.e., a beach) matters more to local residents. We conduct a hedonic analysis of water quality in the Long Island Sound, where an aging infrastructure and heavy precipitation lead to frequent sewage overflows. The analysis focuses on bacteria contamination and beach closures at various access points and monitoring sites. Results suggest that decreases in water quality measured at the nearest beach yield a larger negative effect and impact homes at a farther spatial extent than previously suggested in the literature.

Best Practices for Using Hedonic Property Value Models to Measure Willingness to Pay for Environmental Quality

AbstractThe hedonic property-value model has been refined over more than forty years to become one of the premier approaches to valuing environmental amenities. This article presents best practices...

What does it cost to ensure salt marsh migration? Using hedonic modeling to inform cost-effective conservation

The preservation of salt marshes under rapid sea-level rise (SLR) typically requires the conservation of marsh transgression zones—undeveloped uplands onto which marshes can migrate. Optimal planning for conservation of this type requires information on the expected benefit of marsh conservation and the cost of land suitable for marsh migration in particular areas. While information is available on marsh benefits within the literature, prior research provides little insight on associated land conservation costs. The coastal hedonic pricing literature focuses primarily on developed land, and there are no models designed to predict the cost of conserving land suitable for marsh migration. This paper develops a hedonic property value model to predict cost and explore price patterns associated with purchases of undeveloped land suitable for salt marsh migration under SLR. The model is illustrated using a case study from the Eastern Shore of Virginia, with a dataset consisting of open-market sales of undeveloped land from 2014 to 2017. Particular attention is paid to characteristics that determine marsh migration potential such as coastal distance, elevation and connectivity. Results demonstrate the insight for conservation planning that can be provided by models of this type and the errors associated with the use of simplified proxies to predict conservation costs of land suitable for marsh migration.

Hedonic Analysis of Forest Pest Invasion: the Case of Emerald Ash Borer

The emerald ash borer (EAB) was first detected in North America in 2002, and since its introduction, this invasive pest has killed millions of ash trees. While EAB kills native North American ash trees in all settings, its impacts have been especially large in urban areas where ash has been a dominant street tree, especially in residential areas. While some management costs, such as insecticide treatment, tree removal, or tree replacement, are relatively straightforward to compute, the impact that EAB has had on residential property values is less clear. To better understand the economic cost of EAB in urban settings, we conducted a hedonic property value analysis to evaluate the impact of ash tree damages due to EAB infestation on housing sales prices. This study was conducted in the city of Milwaukee, Wisconsin, which had high stocking levels of ash trees prior to EAB’s arrival. The objectives of the study are to investigate: (1) how EAB-infested ash trees affect property values; (2) whether the benefits from healthy ash trees to property value change after arrival of EAB; and (3) whether healthy ash trees located within infested neighborhoods provide the same benefits as the healthy ash trees located outside of infested neighborhoods. In general, our results show that the EAB outbreak has had a negative impact on home values for properties located in close proximity to the ash tree component of the urban forest. This result holds true for neighborhoods where EAB does not yet pose an imminent threat, and is amplified for neighborhoods where EAB has been detected. Our results highlight the early stages of a dynamic economic process that impacts urban residential property owners subject to the risk of EAB or other tree pests and diseases. In general, we find that forward-looking behavior of residential property owners is capitalized into property values during the process of forest pest infestation.

Valuing bushfire risk to homeowners: Hedonic property values study in Queensland, Australia

Bushfires are a common occurrence and are an inevitable natural event in many regions of Australia in most years. Despite the dangers of such bushfires to nearby properties and human life, humans continue to live in close proximity to bushfire prone areas. The pertinent questions asked in this study are whether residents are aware of the dangers of living in such areas- and if so, is it reflected in lower property values? Such residents have the choice of either discounting the risks of bushfires in their neighbourhoods or deciding to pay more to live in bushfire areas for the positive amenity values afforded by forested bushland settings. Buyers paying a premium price to live in close proximity to green space are well documented in hedonic property (HP) values studies. We examine this phenomenon using data available for forested bushfire prone areas in the immediate environs of the city of Brisbane, Queensland, Australia using an HP values approach. For this study sales data of 1028 houses in four suburbs are used. The regression results clearly show that residents in fact are paying more to be close to green space (forested areas) which is also clearly identified as bushfire prone areas. The threat of bushfires may have an effect on property prices but it is dominated by the desire to live close to green spaces.

Land preservation policy effect or neighborhood dynamics: A repeat sales hedonic matching approach

We offer an improvement on the traditional hedonic property value estimation by using a repeat sales matching estimator applied to a policy context where the distance to nearest permanently protected preserves changes over time. We use several strategies to control for unobserved heterogeneity with data from multiple transactions on the same residential parcels from Western Riverside County in Southern California. We have developed data on the conversion to permanent preserves over a 16-year period. We present an empirical strategy to differentiate geographically broad treatment effects from neighborhood unobservables using Coarsened Exact Matching.

Benefits and ancillary costs of natural infrastructure: Evidence from the New Jersey coast

This paper empirically estimates the economic impacts of a large-scale public investment in natural infrastructure aimed at adapting to climate change and increasing coastal resilience. I utilize temporal and spatial variation in investment in dunes to provide a hedonic property value estimate of the economic benefits. I identify the net effect of treatment utilizing the doubly robust Oaxaca-Blinder estimator and show that coastal housing price increases attributable to constructed dunes are approximately 3.6%. A decomposition of the average impact suggests that the policy intervention generates ancillary costs related to impaired ocean views and privacy concerns that partially offset large protection benefits.

Livestock Price Formation in Suri Pastoral Communities in Bench Maji Zone, Southwest Ethiopia: Hedonic Property Value Approach

Livestock are non-marketed assets which are used to enhance social status in Suri pastoral communities. The lack of access to formal or informal market for livestock, livestock products and by-products in the area forced the Suris to barter livestock with other physical properties in times of family emergencies and food shortage. This study, therefore, aimed at assessing how livestock price was formed in a bartering economy in Surma pastoralist district. Primary data were collected through key informant interview and structured questionnaire. A total of 100 pastoralists were selected by using simple random sampling technique. Data were analyzed using hedonic property value (HPV) approach and multiple linear regression analysis. The result revealed that livestock rearing provide multiple benefits to Suris in terms of enhancing wealth and social status, dispute settlement, source of diet and bride payment. The absence of market place and periodic market date in the area made Suris to barter cattle forbarn of maize, Kalashnikovs, goats and gold mine. However, physical characteristics like age and body condition of ox/bull; and external factors like season and market location affected cattle price. Therefore, attention has to be given to the factors affecting cattle price to improve the benefits of the pastoralists.

River restoration and hedonic property value analyses: Guidance for effective benefit transfer

Abstract Using home sales data for 10 years and four sites in Maine (USA), we estimate marginal willingness to pay (WTP) for river proximity and present a criterion-validity test of the use of benefit transfer. Given the degraded state of Maine's waterways (partly due to damming of rivers for commerce), we find positive, concave relationships between housing values and river distance. We find statistically different estimates of marginal WTP across the four markets, but results from the same watershed are more similar. Also, we find mean WTP is diminishing with average river distance, which is consistent with the empirical functional form. Comparing original and benefit transfer estimates, we find errors range from 29% to over 1000%, growing with spatial distance between the study and transfer sites. Lastly, we estimate a difference-in-difference model for the single market that has witnessed dam removal, and we apply the results to the other markets (that could undergo dam removal as well). While informative, our results suggest caution in the use of benefit transfer in applications of hedonic property price analysis.

The Implicit Price of Aquatic Grasses

Submerged aquatic vegetation (SAV) in the Chesapeake Bay is well below half of its historic levels, largely due to excessive nutrient and sediment loads degrading water quality. SAV provides important ecosystem functions, many of which are beneficial to local residents. To understand the implicit value residents place on SAV and the ecosystem services it provides, we undertake a hedonic property value study using residential transactions in 11 Maryland counties adjacent to the Chesapeake Bay. These data are matched to high-resolution maps of SAV coverage. We pose a quasi-experimental comparison and examine how the prices of homes near the waterfront vary with the presence of SAV. On average, waterfront and near-waterfront homes within 200 meters of the shore sell at about a 6.5% premium when SAV is present. Applying these estimates to the 185,000-acre SAV attainment goal suggests total property value gains on the order of $436 million.

Improving Water Quality in an Iconic Estuary: An Internal Meta-analysis of Property Value Impacts around the Chesapeake Bay.

This study conducts a meta-analysis and benefit transfer of the value of water clarity in the Chesapeake Bay estuary to estimate the property value impacts of pollution reduction policies. Estimates of the value of water clarity are derived from separate hedonic property value analyses of 14 counties bordering the Bay. The meta-analysis allows us to: 1) estimate the average effect of water clarity in the Chesapeake Bay, 2) investigate heterogeneity of effects across counties based on socioeconomic and ecological factors, 3) evaluate different measures of water clarity used in the original hedonic equations, and 4) transfer the values to Bayfront counties in nearby jurisdictions to estimate the property value impacts of the Total Maximum Daily Load (TMDL), a policy to reduce nutrient and sediment pollution entering the Bay that is expected to improve water clarity and ecological health. We also investigate the in-sample and out-of-sample predictive power of different transfer strategies and find that a simpler unit value transfer can outperform more complex function transfers. We estimate that aggregate near-waterfront property values could increase by roughly $400 million to $700 million in response to water clarity improvements from the TMDL.

The implicit value of tree cover in the U.S.: A meta-analysis of hedonic property value studies

Trees in residential neighborhoods and communities provide benefits for homeowners that are capitalized into residential property values. In this paper, we collected data from hedonic property value studies and merged these data with ancillary spatial data describing forest and socio-economic characteristics surrounding each study area to conduct a meta-analysis of the impact of tree canopy cover on the value of residential properties. The meta-analysis suggests that property-level tree cover of about 30% and county-level tree cover of about 38% maximize the implicit price of tree cover in property values. Currently, tree cover in the original study areas was about 14%, on average, around or near study properties. The empirical results, therefore suggest under investment of tree cover on private property from the perspective of individual property owners and from a societal perspective. The findings also have implications for community forest programs regarding planting trees and protection of mature trees to address potential changes in tree abundance, species diversity and stand age due to development and climate change.

IMPACT OF WILDFIRES AND FLOODS ON PROPERTY VALUES: A BEFORE AND AFTER ANALYSIS

One of the most evident casualties of a natural disaster is the property market. The private and social costs from such events run into millions of dollars. In this paper, we use a unique dataset to examine the impact on residential house prices affected by natural disasters using a hedonic property (HP) values approach. For this purpose, we use data before and after a wildfire and floods from Rockhampton in central Queensland, Australia. The data is unique because one suburb was affected by wildfires and another was affected by floods. For the analysis, three suburbs namely Frenchville, Park Avenue and Norman Gardens are used. Frenchville was significantly affected by wildfires in the latter part of 2009 and to a lesser extent in 2012, while Park Avenue was affected by floods at the end of 2010, January 2011–2013. Norman Gardens, which was relatively unaffected, is used as a control site. This enables us to examine the before and after effects on property values in the three suburbs. The results confirm that soon after a natural disaster property prices in affected areas decrease even though the large majority of individual houses remain unaffected. Furthermore, the results indicate that the largely unaffected suburb may gain immediately after a natural disaster but this gain may disappear if natural disasters continue to occur in the area/region due to the stigma created. The results have several important policy decision and welfare implications which are briefly discussed in the paper.

Disamenity impact of Nala Lai (open sewer) on house rent in Rawalpindi city

Over time, many natural drains for storm water have turned into open sewers due to the absence of proper sewage systems in Rawalpindi city of Pakistan. The “Nala Lai” is now a fully open sewer that Rawalpindi relies on to get its waste out. In this study, we use the Hedonic property value method to estimate that how disamenity of open sewer system, affect housing prices. We provide estimates of the benefits of converting the open system into a closed sewer system. We find that house rents decrease by approximately 10 % if there is an open sewer (nali) by the house. House rents also increase for homes located further away from the main open drain (Nala Lai)—e.g. a house located 400 m away from the main open drain enjoys a 12 % increase in rent because of its distance. Sewer smell has a depressing effect on rent in those areas where smell remains constant throughout the day. The results suggest that residents are willing to pay to be away from bad odor emanating from the open sewerage system. City planners need to take this into account and consider installing sewerage pipes in open sewer areas, which would change the nature of Nala Lai from a disamenity to an amenity.

Is What You See What You Get? The Value of Natural Landscape Views

Modern geographic information system (GIS) tools have allowed a more careful examination of how the physical characteristics of a property’s neighborhood and surrounding land uses are capitalized into property values. The ArcGIS Viewshed tool is a case in point: it identifies the cells in an input raster that can be seen from one or more observation points. In this study, we use the tool in a hedonic property value model that estimates a home’s sale price as a function of the percentage of its view that encompasses various “green” land covers — forest, farm land, and grassy recreational lands — as well proximity to such green spaces. We use 25 years of data from St. Louis County, Missouri, along with land cover data from 1992, 2001, and 2006, to estimate a property fixed-effects model. This approach, which minimizes the bias from omission of time-constant unobservable variables, is a methodological advance over some prior studies of the value of a view. We find that forest views negatively affect home prices, whereas farm land and grassy area views have positive effects (though only the farm land results are statistically significant). Proximity to each of these types of lands has value, however: more of each type in a close buffer around the property increases the property’s sale price. We hypothesize that our results are related to two factors: the topography of the study area and the fact that farm land has been converted to development over time, leading to a relative increase in its value.

Irrigated Agricultural Adaptation to Water and Climate Variability: The Economic Value of a Water Portfolio

AbstractIncreasing aridity, more frequent and intense drought, and greater degrees of water scarcity create unique challenges for agriculture. In response to these challenges, which often manifest themselves as lower and more variable surface water supplies, as well as depleted and degraded ground water supplies, growers tend to seek opportunities to adapt. One option for growers to reduce their exposure to water scarcity and heightened uncertainty is to diversify. Indeed, access to a portfolio of supplies is one way in which water and irrigation districts, as well as individual growers, are responding to the changing landscape of water resource availability. This article evaluates the benefits to irrigated agriculture from having access to multiple sources of water. With farm‐level information on 1,900 agricultural parcels across California, we use the hedonic property value method to investigate the extent that growers benefit from having access to multiple sources of water (i.e., a water portfolio). Our results suggest that while lower quality waters, less reliable water, and less water all negatively impact agricultural land values, holding a water portfolio has a positive impact on land values through its role in mitigating the negative aspects of these factors and reducing the sensitivity of agriculture to climate‐related factors. From a policy perspective, such results identify a valuable adaptation tool that irrigation districts may consider to help offset the negative impacts of climate change, drought, and population increases on water supply availability and reliability.

A Dynamic Model of the Housing Market: The Role of Vacancies

While the hedonic property value model and recently developed computable general equilibrium urban models assume the housing market is in equilibrium, recent years have witnessed extreme circumstances such as large changes in housing prices, high levels of mortgage default, and high levels of foreclosure that bring into question this assumption. This highlights the need for a better understanding of the dynamics of the housing market and the mechanisms that drive and sustain periods of disequilibrium. In this analysis, I develop a dynamic model of the housing market where vacancies naturally arise as the error correction mechanism. I estimate this model using annual U.S. panel data at the MSA level for 1990–2011. The results show that when there is excess demand, prices rise when vacancies fall but prices do not fall when there is excess supply and vacancies rise. This is consistent with the belief that prices are sticky downwards and hence prolong housing downturns. On the other hand, when there is excess supply, there is a relatively stronger decline in new housing in response to a rise in vacancies and much less of a new housing reaction when there is excess demand and vacancies fall. Furthermore, when I allow for a structural shift in the housing market brought on by the Great Recession (2006–2011), I find that the housing market became more responsive on both sides – excess supply and demand – during this period.

The suitability of hedonic models for cost-benefit analysis: Evidence from commuting flows

We compare two estimates of benefits arising from the construction of new bridges in south-west Norway. One estimate comes from a hedonic property value model. Rather than follow an approach which is strictly theoretically correct, we adopt Rosen’s simple first-stage approach. To investigate and validate whether this simplified approach gives a reasonable estimate, we compare it to an estimate derived from a travel demand model. We find that a variant of an ex post hedonic house price model gives very similar estimates to the estimates from the travel demand model. This supports a hypothesis that the simplistic hedonic approach is reasonable.