Peek-a-Boo! The Value of a View

The study of the impact of views on property values is a mature area of research and has been studied extensively over the past 25 years. This is especially true for research into the impact of water views on residential property values. Numerous studies have found very large premiums for homes possessing views of nearby bodies of water. A 2001 study published in The Appraisal Journal by Michael Seiler, Vicky Seiler, and Michael Bond, found that homes with views of Lake Erie carried a 56% premium, which translated to $115,000. The view as an amenity is an interesting case, and it highlights several issues that plague those many attempts by both scholars and practitioners to quantify the price impacts of various resources, property characteristics, and amenities. First of all, the data is scarce and interpretation is tricky. Databases such as MLS are inconsistent in their reporting of views and, even when recorded, they have little to say about the kind of view. Do you have to climb onto the roof to see a sliver of the ocean or do you have panoramic views of water from the master bedroom? Even a simple GIS database is of little help, since proximity to a body of water does not necessarily equate to a view, even if elevation is taken into account. Aside from the data, a study of a view amenity must take into account and somehow disentangle the influence of the resource from the view of that resource. In the language of statistical modeling, such correlation between two or more independent predictor variables is known as multicollinearity. For example, a study of the impact of lake views must take into account the recreational value of the lake for boating and fishing. There have been some creative solutions to this problem. A 2008 study by Steven Schultz and Nick Schmitz also published in The Appraisal Journal used homes with views of two man-made lakes in Omaha. These man-made lakes, created for flood control and storm water management, had such poor water quality that they provided little recreational value.

The View From a Property

 Broadly speaking, viewshed impacts arise when a desirable view is blocked or where an obnoxious view is created. In the first instance, when a view is blocked, an important and often misunderstood issue is whether or not the subject property has a legitimate right to that view in the first place. This becomes a question of abutter’s rights—a property owner’s rights to air, light, view, visibility, and access. For example, if a property owner purchases a home with an outstanding ocean view, but there is a vacant lot between the property and the ocean, that would generally be regarded as a “borrowed view”—a temporary benefit. In other words, the property owner may enjoy the view until the vacant lot is developed, but they can have no real expectation that such view is permanent. They are, in effect, “borrowing” that view.

 The same idea applies to the latter case in which an obnoxious view is created by a new development or land use. If the new development conforms to the zoning and development regulations, it is difficult to argue that such development has created a diminution in value, considering that the potential use of the adjacent property would—or should—have been known. On the other hand, if a property is purchased and subsequently a neighboring property is rezoned to allow for an undesirable development, then this could more legitimately be claimed to have an impact on value. Like any detrimental condition study, however, this would ultimately be a question of market data, and often these issues are subject to legal interpretations that are outside of our scope as valuation experts.

The View Onto a Property

The other class of view issues involve situations where the view onto a property is impacted. This scenario is less common in property value diminution claims and is generally not the subject of viewshed research, but it is interesting in its own right. Consider a property that is purchased and enjoys a private pool area in the backyard. However, the seller of the property had signed off on variances that allowed a neighbor to add living area that encroached into the typical setback, and the neighbor develops a looming structure that now looks into the previously private pool area. In this example, the seller failed to disclose that they had signed off on this setback variance. The new addition creates what is informally called a “fishbowl” effect where those using the pool now feel that they have no privacy and are being watched. In such a situation, a suit may be filed by the buyer against the seller for failure to disclose, and a measure of damages may be the value of the home with a private pool area (typically the price paid) verses the value of the house with the “fishbowl” effect. Ideally, comparable sales could be located with both private pool areas and those with similar “fishbowl” effects, and a comparison of the two could be made.

On the other hand, in the world of eminent domain, visibility or the right to be seen is often considered in the condemnation of freeway-oriented retail properties such as gas stations, fast food establishments, or even car dealerships. The potential impact of the planned project on visibility is a compensable element and must be considered by the appraiser in the analysis of the “after condition.”

What does the Literature Say?

In my next post I’ll discuss the recent literature on viewsheds and their impacts on property values. As I wrote in February, in the world of amenity and disamenity research, the viewshed literature is one of the most sophisticated in its data and methodologies. Therefore it’s worth looking at this literature to see what may be possible in the study of other resources and property characteristic and their positive—or negative—impacts on property values.