Do Housing Prices Reflect Water Quality Impairments? Evidence from the Puget Sound
Using data from Washington state and a set of empirical methods to control for confounding factors, we estimate the effects of water quality impairments on residential housing prices. We also examine the role of individual water quality parameters such as fecal coliform and dissolved oxygen that are used to judge the attainment of water quality standards. Results indicate that impairments have a negative effect on home values. Using a hedonic model that includes fine resolutionspatial fixed effects, we find that being located adjacent to an impaired waterbodylead to an annualized depreciation of $2,177. We also find that water quality impairments due to fecal coliform have the largest effects. Given the broad interest in evaluating the economic benefits of water quality, the use of impairment data to evaluate these benefits on a larger scale could lead to improved allocation of resources to protect the myriad beneficial uses that depend on water quality.