In a 2005 study published in the Journal of Political Economy, [2005, vol. 113, no.2] Kenneth Y. Chay (University of California, Berkeley and National Bureau of Economic Research) and Michael Greenstone (Massachusetts Institute of Technology, American Bar Foundation, and National Bureau of Economic Research) performed an extensive study that provides convincing empirical evidence demonstrating the correlation between air quality and housing values. Their conclusion below shows a $45 Billion aggregate gain in property values where strict regulations forced the improvement of air quality at the county level.
The Clean Air Act Amendments (CAAA’s) enacted in the mid-1970′s marked our nation’s first attempt to regulate levels of air pollution to protect the health of it’s citizens. The CCCA’s established a threshold for pollution concentrations and designates counties as either “attainment” or “nonattainment” and provides for more strict regulations on polluters in “nonattainment” counties.
Chay and Greenstone used EPA data, and County and City Data Books data file largely based on the 1970 and 1980 censuses which offered them the overall view of housing and county characteristics upon which their study was based.
IX. Conclusion – (page 43-44)
This study has exploited the air pollution reductions induced by the Clean Air Act Amendments to provide new evidence on the capitalization of air quality into housing values. The evidence suggests that TSPs nonattainment status is causally related to both declines in air pollution and increases in housing prices during the 1970s. Using the county-level regulations as an instrument, we estimate that a 1 mg/m3 reduction in TSPs results in a 0.2–0.4 percent increase in mean housing values, which is a –0.20 to –0.35 elasticity. These estimates of the average marginal willingness to pay for clean air are robust to quasiexperimental regression discontinuity and matching specification checks. Further, they are far less sensitive to model specification than cross-sectional and fixed-effects estimates, which occasionally have the “perverse” sign. The estimation of a random coefficients model provides modest evidence that the marginal benefit of reductions in TSPs is lower in communities with relatively high pollution levels, which is consistent with preference-based sorting.
Welfare calculations suggest that the mid-1970s TSPs nonattainment designation provided a $45 billion aggregate gain for homeowners in nonattainment counties. This gain is large, but the net effect on welfare is unknown since reliable estimates of the social costs of these regulations are not available. Regardless of whether the TSPs nonattainment designations pass or fail a cost-benefit test, this paper’s findings suggest that individuals place a higher value on clean air than has previously been recognized.
gainesvilleflorida