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What Do Property Values Really Tell Us? A Hedonic Study of Underground Storage Tanks

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Paper Number: 2012-01

Document Date: 03/02/2012

Authors: Dennis Guignet

Subject Areas: Water Pollution; Hazardous Waste; Valuation Methods

Keywords: hedonic analysis; housing prices; leaking underground storage tanks; LUST; contaminated sites; groundwater contamination; remediation benefits

Abstract: Hedonic property value models are widely used, but are susceptible to omitted variable bias and potentially invalid conjectures regarding the assumed measure of environmental quality. This paper focuses on an application where both are of particular concern: leaking underground storage tanks. I estimate a hedonic model using quasi-experimental and spatial econometric techniques. Similar to previous studies, I examine how house prices vary with distance to the disamenity. This approach yields little evidence that prices are adversely impacted. However, to better measure risks, I utilize home-specific data on correspondence from environmental regulators, and find a 9-12% depreciation when households are well-informed.

Attachment: 2012-01.pdf2012-01.pdf (908K, About PDF)

Journal Publication:Guignet, Dennis. "What do property values really tell us? A hedonic study of underground storage tanks." Land Economics 89.2 (2013): 211-226.

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