Hazardous waste sites and housing appreciation rates

Abstract

The dynamic effect of a hazardous waste site is analyzed by investigating the causal relationship between housing appreciation rates and house location in relation to a hazardous waste site using resale data from individual sales transactions in Dallas County, Texas. The results indicate that in the period in which the hazardous waste site was identified and cleanup occurred, residential property owners in close proximity to the hazardous waste site experienced lower housing appreciation rates. In the first postcleanup period, they gained some of the lost ground with a higher appreciation rate. In a subsequent post-cleanup period, their appreciation fell in line with property owners whose properties are located farther away from the hazardous waste site. This suggests that a long-run equilibrium has been reached since appreciation rates were not significantly different across the Dallas housing market in the second post-cleanup period. Although the results indicate that adjustment takes time, an equilibrium is eventually reached for the houses in this repeat sales data set. An important implication of our analysis is that since the post-cleanup recovery was not immediate, property owners should be compensated for their loss of liquidity.Key words: housing appreciation rates, hazardous waste sites.The public's increasing awareness of environmental risks is reflected in the negative impact of environmental contamination on property values in the real estate market.Although the effects of environmental contamination on property values have been studied, the current body of literature on the effects of locally undesirable land uses does not address the adjustment of property values to the discovery and cleanup of environmental contamination. Kiel et al. [9] come the closest to analyzing this issue.They examine the effect of an incinerator siting on housing appreciation rates. However, their study is limited to siting and operation and does not consider any time period after the incinerator has been shut down or removed. In contrast, this paper examines the impact of environmental contamination and cleanup on residential property value appreciation rates by analyzing data from before identification of the hazardous waste site and before, during, and after cleanup has been completed. Consequently, it is possible to empirically investigate the longer-run market adjustment.Stigma is a negative attribute of real estate acquired by the discovery of contamination and reflected in price Elliot-Jones [4].· Using a theoretical model with external economies and adjustment costs, McCluskey [16] shows that both temporary stigma and permanent stigma are possible equilibrium outcomes after discovery and cleanup of a hazardous waste site. If the price adjustment after the cleanup of a hazardous waste site is gradual, as opposed to immediate and permanent, then the cost to the residential property owner cannot be measured immediately after cleanup. 2The duration of stigma has significant legal ramifications. When the cour...

Pollution and land use: Optimum and decentralization

“…Thus, (14) states that at all industrial locations, land rent equals residual income (revenue less the wage bill).…”

“…This bid-rent function follows from (14) and indicates the maximum amount industry can pay for land at x without suffering losses when Q(x) in (14b) is imposed as a tax per unit of industrial land.…”

“…From (14) it can be seen that its optimality hinges on the assumptions of constant returns to scale in production and the additivity of the dispersion function. When these assumptions are relaxed, we conjecture that the corrective tax still equals the pollution damages 7 Henderson [5] has shown that in a spatial setting over the short run, Pigouvian taxes are efficient when the dispersion function is weakly convex in emissions D 11 0 ( ).…”

“…In still other cities buffer zones often exist between waste collection industries (landfills) and households (e.g., Dallas, Texas). 14 …”

“…In the subsequent analysis we shall disregard this case. 14 For permanent versus temporary diminution in bid-rent schedules for households located near landfills, see McCluskey and Rausser [13,14]. 15 The NC locations are theoretical tools intended to help us in the coming analysis.…”