Guarding the Subjective Premium: Condemnation Risk Discounts in the Housing Market
26 Pages Posted: 22 Jul 2014 Last revised: 29 Nov 2015
Date Written: February 20, 2014
We propose the condemnation risk discount theory, whereby home buyers deduct a discount from housing prices in the absence of insurance against the risk that the government will condemn their property for private transfer. Homeowners cannot separate out the negative risk that their home will be condemned from the positive effect that high-value redevelopment projects may have on the surrounding area. There are, consequently, competing effects of the risk of eminent domain on fair market value.
Keywords: Kelo, eminent domain, economic development
JEL Classification: K2, H7, G28, R21, R28
Suggested Citation: Suggested Citation