The spatial effect of estuaries pollution on the housing rental market: evidence from South America

Abstract

Estuaries are water bodies, many of which contribute to the sustainable development of cities. Many of them are considered natural landscapes, offering various recreational services to the population. However, estuary degradation is a common problem in developing countries. Ecuador, for example, has a significant problem with the pollution of its estuaries. Machala is one of the most affected cities due to the contamination of these water bodies. This issue has generated negative externalities in the housing market. Thus, our central hypothesis is that rental prices of houses are revalued as their distance from polluted estuaries increases. Using the hedonic pricing approach, our results confirm that the price of a residence increases by US$9.45 for every 100 m farther it is from the closest estuary. This amount constitutes approximately 5.25 per cent of the average rental value in Machala.