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A Valuation of Restored Streams Using Repeat Sales and Instrumental Variables

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Abstract

Urban streams provide use and non-use value to local stakeholders and distant beneficiaries, alike, and play a critical role in maintaining ecosystem health. Due to dense residential development and associated stormwater infrastructure, the services these streams provide are at risk and likely to degrade as additional urban growth occurs. To combat degraded stream services and improve environmental quality, significant efforts to restore impaired streams are increasingly common. However, these restorations are costly, making estimates of the associated benefits critical to evaluating restoration policies. Using a repeat sales approach and instrumenting for the endogeneity of site selection we provide causal evidence of housing value capitalization of stream restoration projects to nearby property values. We find a local average treatment effect of 11% in property appreciation for our most inclusive distance buffer and show that ignoring endogenous assignment of restoration leads to bias on the scale of an order of magnitude in these estimates.

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Notes

  1. Costs for restoration projects in Baltimore County average $2.1 million and $599 per linear foot.

  2. Frequent flash flooding can alter channel and floodplain structure, cause channel incision and widening, exposing banks to bare ground promoting undesireable invasive plants and deposits from upstream debris.

  3. Moran’s I tests show correlation in prices but not in the residuals of either the spatial fixed effect or GAM specifications.

  4. Gaining in popularity, stream mitigation banking (SMB) allows developers to degrade watershed ecosystems so long as they “offset” the damage by restoring damaged streams elsewhere (Lave et al. 2008).

  5. Discount rate of 2%.

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Correspondence to Charles Towe.

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Towe, C., Klaiber, H.A., Maher, J. et al. A Valuation of Restored Streams Using Repeat Sales and Instrumental Variables. Environ Resource Econ 80, 199–219 (2021). https://doi.org/10.1007/s10640-021-00575-9

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