Looking Under the Hood 9.1– A Study of Superfund Site Impacts on Residential Prices in Los Angeles, California

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.

?Hurd[1] quantified the property value diminution (PVD) associated proximity of homes to the Operating Industries, Inc landfill (opening date of 1948) in Los Angeles. The author utilized two separate dates of value. The first observation period, August 1983 to May 1985, corresponded to the date the former landfill was listed on the National Priorities List. The second period, January 1994 to June 1996, was associated with the approximate dates of the final stages of cleanup. Approximately 20,000 people lived within one mile from this facility during the time of the studies.

In 1984, the site was closed because the landfill reached maximum capacity. It was noted that several negative externalities occurred before and after closure, including underground fires, explosive methane levels, and airborne vinyl chloride contamination (no discussion of difference in differences).

The author relied on an unknown number of sale observations obtained from TRW-REDI, a data vendor for his Hedonic Property Value Model. To analyze the variation in impacts due to proximity, the author created models that included and “detracted” distance bands as independent variables. Cleanup costs were not expressly stated; however, the author mentioned that a $205 million settlement was reached between the EPA and the potential responsible party (PRP).

The hedonic output results initially provided evidence that the listing of the site on the NPL correlated with an 8-19% (PVD) for homes within 1000 feet, but during the final stage of site cleanup (10 years later), the magnitude of PVD diminished significantly to less than 75% of the initial findings. Still, and more importantly, the author’s findings of damage estimates were statistically insignificant.

[1] Hurd, B. (2002). Valuing Superfund Site Cleanup: Evidence of Recovering Stigmatized Property Values. Appraisal Institute, 426-437.