Meta-Functional Transfer of Hedonic Property Values: Application to Great Lakes Areas of Concern

Abstract

This paper explores the use of functional benefits transfer to forecast the effects of waste sites on property values. The results of a meta-analysis of hedonic studies of waste sites are coupled with spatial analysis techniques to produce estimates of the effects of toxic contamination in Areas of Concern (AOCs) in the U.S. Great Lakes. Based on U.S. Census data for median home values, the methods used here suggest that approximately S5.2 billion (2005 dollars) have been lost in residential property values surrounding twenty-three of the AOCs. This compares to estimates that place the cost of remediation of all U.S. AOCs at up to $4.5 billion (2005 dollars). The case study also identifies issues surrounding the use of a meta-analysis with hedonic property value studies to support functional transfer.

Residential demand for sediment remediation to restore water quality: Evidence from Milwaukee

“…If average household willingness to pay for cleanup is $19,031, then the aggregate benefit would be $875 million. This is in line with other estimates, in particular,Braden et al (2010) used benefit transfer to estimate the benefits of fully remediating the Milwaukee AOC to be worth $1.6 billion, adjusted for inflation.…”

Residential mobility and the value of water quality improvements in the Milwaukee Estuary Area of Concern

“…1 Nearly all papers estimated benefits using property value hedonics, applied to either revealed or stated preference data, although sometimes both. However, Braden et al (2010) used meta-analysis to estimate the benefits of restoring 23 U.S. AOCs, which they estimated would return $5.2 billion in lost residential property value.…”

The effect of remediating PCB-contaminated sediments on home prices in Milwaukee, Wisconsin, USA

“…Some attribute these low benefit-cost ratios to the fact that many ecosystem services provided by clean water are not included in benefit estimation; for example, Downing et al (2021) estimates that controlling eutrophication levels of Lake Erie could result in $3.1 billion of economic benefit through avoided climate damages and notes that these benefits are commonly not accounted for in the cost-benefit tests of water quality initiatives. If estimates of the accrued cost of AOC remediation efforts are accurate (Hartig et al 2020), delisting AOCs would need to generate more than $529 million in benefit per AOC, on average, to generate a benefit-cost ratio greater than 1; this benefit amount appears to far exceed prior hedonic estimates (Braden et al 2010). An important caveat, of course, is that hedonic analysis only captures use values, and nonuse values can be sufficient to make up the difference between total benefits and costs (Loomis 2006;Kenney et al 2012).…”