Looking Under the Hood 7.4– A Recent Study of Lead Contamination in Drinking Water and Residential Values in Flint, Michigan
Orell Anderson, MAI, FRICS, ASA
Real Estate Litigation Consultant, Forensic Appraiser, Expert Witness, Property Value Diminution
Real estate pricing research provides evidence that properties potentially exposed to perceived or actual risks may experience price impacts. Looking Under the Hood reviews publications that illustrate the theoretical, methodological, and data challenges faced by scholars and practitioners studying detrimental conditions and their impacts on property values.
Christensen et al[1] constructed an empirical study with a focus on the impact of lead-contaminated drinking water on housing values in Flint, Michigan. In April 2014, the water supply source from the Detroit Water Supply was changed over to the local municipal water source; however, residents complained about the quality issues and, due to do significant local and national media attention about lead contamination, on October 1, 2015, a Public Health Emergency was declared.
The authors’ study focused on a dataset of approximately 36,000 home sales that spanned from 2006 through June 2017. The source of the real estate transactional data was Zillow and the source of the environmental data on lead contamination was from the University of Michigan. The hedonic study was unique because two separate event dates were analyzed. The first event of study, the date the municipal water supply source was switched, ranged from April 2014 to September 2015. The second event, titled the “crisis period,” began after the Public Health Emergency declaration; it spanned from October 2015 to June 2017.
The hedonic model provided evidence that lead-contaminated drinking water had a significant negative impact on house values after both announcements. House values declined 9% after the city switched its municipal water source and another 20% after the Public Health Emergency was declared. The capitalized PVD showed a $345 to $497 million decrease in overall residential values due to lead contamination for the entire city of Flint.
[1] Christensen, P., Keiser, D., & Lade, G. (2019). Economic Effects of Environmental Crises: Evidence from Flint, Michigan. SSRN Electronic Journal.
Principal at Coastline Realty Advisors
4 年Thanks for sharing this. Given the wide publicity of the Flint situation, I’ve often wondered how home prices fared. Interesting that the value impact was much greater after a health emergency was declared, as opposed to just noticing the crappy water.