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Valuing Sunshine

Author

Listed:
  • David Fleming

    () (Motu Economic and Public Policy Research)

  • Arthur Grimes

    () (Motu Economic and Public Policy Research)

  • Laurent Lebreton

    () (The Modelling House)

  • David C Maré

    () (Motu Economic and Public Policy Research)

  • Peter Nunns

    () (MRCagney)

Abstract

Sunlight influences people’s real estate decisions, but city intensification may reduce sunlight exposure for neighbouring properties, causing a negative externality. There are hitherto no rigorous estimates of the cost of this externality. Using over 5,000 observations on house sales in Wellington, New Zealand, we derive the willingness to pay for an extra daily hour of sun, on average, across the year. After controlling for locational sorting and other considerations in an hedonic regression, we find that each extra daily hour of sunlight exposure is associated with a 2.4% increase in house sale price. This estimate is robust to a variety of alternative specifications. Our results can be used to price negative externalities caused by new development, so replacing inflexible regulations designed to address impacts of development on neighbours’ sunshine.

Suggested Citation

  • David Fleming & Arthur Grimes & Laurent Lebreton & David C Maré & Peter Nunns, 2017. "Valuing Sunshine," Working Papers 17_13, Motu Economic and Public Policy Research.
  • Handle: RePEc:mtu:wpaper:17_13
    as

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    File URL: http://motu-www.motu.org.nz/wpapers/17_13.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Sunlight; house prices; hedonic model; views; elevation;

    JEL classification:

    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • N50 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries - - - General, International, or Comparative

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