ECONOMIC IMPACT OF ST JOHNS RIVER WATER QUALITY ON PROPERTY VALUES
A study examining the proximity effects of water quality on house prices in the St Johns River system in Florida, US
V Seidel, C Diamond, P Yacobellis, A Barker, C Cortez
Publication Date (Web): 4 July 2016
The St Johns River is located on the east coast of north Florida in the US. It is approximately 500km long and 5km wide at its widest point. The river flows through 12 counties and about 3.5 million people live within its catchment of approximately 23,000 square km. The Lower St Johns Basin – the study area – comprises Duval, Clay, Putnam and St Johns Counties.
Following a workshop convened by the University of North Florida to examine the economic value of the St Johns River to the State of Florida, The Balmoral Group was engaged to conduct research that addressed the impacts of the river and its floodplain on property values. Public values for aesthetics, access and open space enjoyment of the river are reflected in property values and ad valorem taxes (rates), and this economic value can be estimated through hedonic pricing models (Palmquist, 2005). Published research affirms that water resources, and changes in water quality, contribute to property values in Florida at varying distances from the water resource, based on attributes of “edge” (representing waterfront premiums) and “proximity” (representing distances to the waterfront or access point).
The economic impact brought about by lower water quality, such as reduced clarity, toxic algal blooms and other effects on the ecological health of the river, can be recognised through reduced property values and, in turn, reduced tax revenue. Forty years of literature have found that lower water quality reduces nearby property values, and recent work has measured the effects of regulation of nutrient loadings on economic values in Florida. In work published in Land Economics using hedonic pricing models, Walsh (2011) found that the value of improved water quality from reduced nutrient loads depends on property location and proximity to waterfront. Walsh suggested that the economic benefits to non-waterfront homes near a waterbody with high water quality may even exceed those realised by waterfront homes with diminished water quality. This study examined the proximity effects of water quality on house prices in the St Johns River system.
A Hedonic model was used to estimate the economic value of the river based on more than 23,000 property sales fronting or near the river over the period 2003 to 2013. The modelling found that riverfront properties in the four counties studied had a combined price premium of $944 million due solely to river frontage. Tributary frontage properties had a $117 million price premium over properties that lacked water frontage, but were otherwise similar in other property characteristics. The value attributable to the river extends to the surrounding neighbourhoods, with an additional $837 million of value for 23,494 properties with proximity to the river.
The increased property values would equate to a theoretical increase in property tax revenues of $45.3 million over 20 years. This study clearly demonstrates that a case for investment in water quality improvements can be made not only from a public amenity perspective but also from a monetary perspective.
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