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Modeling the Property Price Impact of Water Quality in 14 Chesapeake Bay Counties

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  • Patrick J. Walsh
  • Charles Griffiths
  • Dennis Guignet
  • Heather Klemick

Abstract

The Chesapeake Bay and its tributaries provide a range of recreational and aesthetic amenities, such as swimming, fishing, boating, wildlife viewing, and scenic vistas. Living in close proximity to the Bay improves access to these amenities and should be capitalized into local housing markets. We investigate these impacts in the largest hedonic analysis of water quality ever completed, with over 200,000 property sales across 14 Maryland counties. We use a spatially explicit water quality dataset, along with a wealth of landscape, economic, geographic, and demographic variables. These data allow a comprehensive exploration of the value of water quality, while controlling for a multitude of other influences. We also estimate several variants of the models most popular in current literature, with a focus on the temporal average of water quality. In comparing 1 year and 3 year averages, the 3 year averages generally have a larger implicit price. Overall, results indicate that water quality improvements in the Bay, such as those required by EPA’s Total Maximum Daily Load, could yield significant benefits to waterfront and near-waterfront homeowners.

Suggested Citation

  • Patrick J. Walsh & Charles Griffiths & Dennis Guignet & Heather Klemick, 2015. "Modeling the Property Price Impact of Water Quality in 14 Chesapeake Bay Counties," NCEE Working Paper Series 201507, National Center for Environmental Economics, U.S. Environmental Protection Agency, revised Dec 2015.
    • Handle: RePEc:nev:wpaper:wp201507
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    Cited by:

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    2. David Boto-García & Veronica Leoni, 2023. "The Economic Value of Coastal Amenities: Evidence from Beach Capitalization Effects in Peer-to-Peer Markets," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 84(2), pages 529-557, February.
    3. Dennis Guignet & Matthew T. Heberling & Michael Papenfus & Olivia Griot, 2022. "Property Values, Water Quality, and Benefit Transfer: A Nationwide Meta-analysis," Land Economics, University of Wisconsin Press, vol. 98(2), pages 191-218.
    4. Liu, Fangge & Zhang, Wendong, 2018. "The Value of Lake Restoration to Homeowners: Evidence from Iowa using a Difference-in-Difference Approach," 2018 Annual Meeting, August 5-7, Washington, D.C. 274032, Agricultural and Applied Economics Association.
    5. Sarah Nicholls & John Crompton, 2018. "A Comprehensive Review of the Evidence of the Impact of Surface Water Quality on Property Values," Sustainability, MDPI, vol. 10(2), pages 1-30, February.
    6. Heather Klemick & Charles Griffiths & Dennis Guignet & Patrick Walsh, 2018. "Improving Water Quality in an Iconic Estuary: An Internal Meta-analysis of Property Value Impacts Around the Chesapeake Bay," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 69(2), pages 265-292, February.
    7. Heather Klemick & Charles Griffiths & Dennis Guignet & Patrick Walsh, 2015. "Explaining Variation in the Value of Chesapeake Bay Water Quality Using Internal Meta-analysis," NCEE Working Paper Series 201504, National Center for Environmental Economics, U.S. Environmental Protection Agency, revised Nov 2015.
    8. Justin Contat & Caroline Hopkins & Luis Mejia & Matthew Suandi, 2023. "When Climate Meets Real Estate: A Survey of the Literature," FHFA Staff Working Papers 23-05, Federal Housing Finance Agency.
    9. Kuwayama, Yusuke & Olmstead, Sheila & Zheng, Jiameng, 2022. "A more comprehensive estimate of the value of water quality," Journal of Public Economics, Elsevier, vol. 207(C).
    10. Wolf, David & Klaiber, H. Allen & Gopalakrishnan, Sathya, 2022. "Beyond marginal: Estimating the demand for water quality," Resource and Energy Economics, Elsevier, vol. 68(C).
    11. Moore, Michael R. & Doubek, Jonathan P. & Xu, Hui & Cardinale, Bradley J., 2020. "Hedonic Price Estimates of Lake Water Quality: Valued Attribute, Instrumental Variables, and Ecological-Economic Benefits," Ecological Economics, Elsevier, vol. 176(C).
    12. Stephen Newbold & R. David Simpson & D. Matthew Massey & Matthew T. Heberling & William Wheeler & Joel Corona & Julie Hewitt, 2018. "Benefit Transfer Challenges: Perspectives from U.S. Practitioners," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 69(3), pages 467-481, March.
    13. Sampson, Gabriel & Hendricks, Nathan P. & Taylor, Mykel R., 2018. "Land Market Valuation of Groundwater Availability," 2018 Annual Meeting, August 5-7, Washington, D.C. 274320, Agricultural and Applied Economics Association.
    14. James Shortle & Richard D. Horan, 2017. "Nutrient Pollution: A Wicked Challenge for Economic Instruments," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 3(02), pages 1-39, April.
    15. David Wolf & Sathya Gopalakrishnan & H. Allen Klaiber, 2022. "Staying afloat: The effect of algae contamination on Lake Erie housing prices," American Journal of Agricultural Economics, John Wiley & Sons, vol. 104(5), pages 1701-1723, October.
    16. Wainger, L. & Loomis, J. & Johnston, R. & Hansen, L. & Carlisle, D. & Lawrence, D. & Gollehon, N. & Duriancik, L. & Schwartz, G. & Ribaudo, M. & Gala, C., 2017. "Ecosystem Service Benefits Generated by Improved Water Quality from Conservation Practices," C-FARE Reports 260679, Council on Food, Agricultural, and Resource Economics (C-FARE).
    17. Sado-Inamura, Yukako & Fukushi, Kensuke, 2019. "Empirical analysis of flood risk perception using historical data in Tokyo," Land Use Policy, Elsevier, vol. 82(C), pages 13-29.
    18. Irwin, Nicholas & Wolf, David, 2022. "Time is money: Water quality's impact on home liquidity and property values," Ecological Economics, Elsevier, vol. 199(C).
    19. Zhang, Jiarui & Phaneuf, Daniel J. & Schaeffer, Blake A., 2022. "Property values and cyanobacterial algal blooms: Evidence from satellite monitoring of Inland Lakes," Ecological Economics, Elsevier, vol. 199(C).
    20. Matthew T. Heberling & Dennis Guignet & Michael Papenfus, 2022. "Water Quality and Hedonic Models: A MetaAnalysis of Commodity, Market, and Methodological Characteristics," Working Papers 22-06, Department of Economics, Appalachian State University.
    21. Sampson, Gabriel S. & Hendricks, Nathan P. & Taylor, Mykel R., 2019. "Land market valuation of groundwater," Resource and Energy Economics, Elsevier, vol. 58(C).

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    More about this item

    Keywords

    water quality; hedonic property value analysis; Chesapeake Bay; valuation;
    All these keywords.

    JEL classification:

    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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