Property Value Impacts of an Environmental Disamenity

Abstract

The purpose of this paper is to quantify the property value impacts of a change in environmental quality by using the hedonic price model. In particular, we focus on the impact of the presence of landfills on nearby residential real estate prices. We combine elements of an urban location choice and hedonic pricing model to estimate the effects of the presence of multiple environmental disamenities on residential real estate prices. We explicitly account for temporal effects by including housing transactions in areas with both open and closed landfills, and control for information effects. In addition, we treat property taxes and prices as being simultaneously determined. Our analysis suggests that closing landfills will not necessarily mitigate property value impacts.

Keywords: hedonic price model, property values, externalities, environment, urban, rural, regional economics

JEL Classification: R33, Q24, H23