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

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

“…McMillen (2006) and Isely et al (2018) report similar values in restoring the Grand Calumet and Muskegon Lake AOCs, both of which are on Lake Michigan, similar to the Milwaukee Estuary AOC. Our value is lower than the per-household WTP estimates reported in Melstrom (2022) for Milwaukee; however, Melstrom focuses on owners, while our estimate includes the experiences of renters, which make up 59% of households in the city. 6 It is important to keep in mind that these WTP estimates only include benefits through home purchases, although there are many potential sources of benefits from AOC remediation, including values from non-residents.…”

“…Stoll et al (2002) and Melstrom (2022) are the only studies we are aware of that did not measure benefits within a hedonic framework. Stoll et al (2002) measured WTP directly using a survey with a referenda-style contingent valuation question based on removing the BUIs in the Lower Green Bay and Fox River AOC.…”

“…They also reported, based on responses to an open-ended follow-up question, that those adjacent to the AOC are willing to pay more for remediation than those living farther away. Melstrom (2022) used a residential sorting model to find that households in the Milwaukee Estuary AOC were willing to pay 29% of home value if they lived adjacent to cleanup and 12% of home value if they lived 1 mile from cleanup. Melstrom’s research contributes to questions about the distributional consequences of restoring AOCs because he does not find precise evidence that WTP varies between race and income groups, based on a time series cross section of home sales.…”

“…Braden et al 2008a) or a sorting (e.g. Melstrom 2022) framework, which provides insight into the values of owners but not renters. In contrast, our empirical strategy is based on geographically aggregated location decisions across demographic groups.…”

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

“…Moreover, prior research could have underestimated the benefits of cleanup due to problems with correlated unobservables; water quality and pollution affect prices but so do esthetics, so the proximity effect may not necessarily be negative in locations with a mix of BUIs and unimpaired beneficial uses. In contrast, Melstrom (2022) and Donnelly and Melstrom (2022) present ex post valuation studies of remediation in Milwaukee, but their research design uses residential sorting models rather than traditional property value hedonics as we do here. By examining sales before and after remediation, in affected and unaffected locations, our research can further substantiate earlier evidence that restoring AOCs increases local housing prices.…”