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.
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In this research conducted by Robin Wilkinson and Richard T. Melstrom , a hedonic analysis is applied to analyze the impact of the cleanup efforts spanning from 2011 to 2015 on the prices of residential properties. The specific focus on this timeframe is due to the significance of these actions, which aimed to remediate the "largest known deposit of PCB-contaminated sediment in the Milwaukee River Estuary Area of Concern," identified by the EPA.
The Milwaukee Estuary Area of Concern (AOC) encompasses various geographical features, including the Lake Michigan shoreline within the City of Milwaukee and sections of the Menomonee, Kinnickinnic, and Milwaukee Rivers. Over several decades, this region has experienced extensive contamination from industrial wastewater discharge, municipal sewage outflows, and runoff. Consequently, toxic contaminants, such as PCBs, mercury, and petroleum byproducts, have accumulated in sediment deposits, rendering parts of the Milwaukee Estuary harmful to aquatic life, wildlife, and human health. Out of the 14 intended uses for AOCs, 10 have been compromised, leading to beach closures, restrictions on fish and wildlife consumption, and habitat degradation. Prospective buyers in Milwaukee could have become informed about the AOC, Beneficial Use Impairments (BUIs), and the cleanup activities. These may include longstanding fish consumption advisories, active local environmental organizations monitoring water quality, public awareness due to the visible nature of the remediation projects, and media coverage.
Numerous remediation initiatives have been carried out at various locations within the estuary. For instance, in 2008, the Wisconsin Department of Natural Resources (DNR) organized a cleanup effort near Lincoln Park, successfully removing a substantial amount of contaminated sediment and 800 pounds of PCBs. Subsequently, in 2009, the US Environmental Protection Agency (EPA) oversaw the removal of 170,000 cubic yards of contaminated sediment, which contained 1,200 pounds of PCBs from a 2,000-foot stretch of the Kinnickinnic River. The most extensive cleanup occurred between 2011 and 2015 when the Wisconsin DNR and the U.S. EPA executed a comprehensive project near Lincoln Park, including removing substantial sediment volumes and PCBs. Furthermore, this effort involved the restoration of 12 acres of wetland and riparian habitat. One of the primary goals of these remediation efforts was to address four (BUIs), including restrictions on fish and wildlife consumption, habitat degradation, benthos degradation, and dredging restrictions. The 2011–2015 cleanup actions had a price tag of $48 million, according to Dow.
To assess the impact of reducing PCB levels, the researchers compare properties near the remediated area with those farther away. They employ regression analysis and a hedonic property value model, utilizing data from before and after the 2011–2015 cleanup actions. It's important to note that some parts of this area had already undergone remediation in 2008, and their estimates account for the additional actions taken to address PCB contamination further and restore habitat.
For this study's purposes, non-technical measures, specifically proximity to the river and the timing of the cleanup are employed. Unfortunately, systematic data on PCB concentrations in water, fish, or wildlife habitats for estimating effects in the Milwaukee Estuary AOC are lacking. Nevertheless, these non-technical measures align with prior hedonic research that has demonstrated how water quality effects depend on proximity and discrete changes in ecosystem services. Furthermore, the combination of these measures—proximity to the river after remediation—provides insights into the perceived benefits of cleaning up PCBs and restoring fish and wildlife habitat in a major urban area.
The research findings suggest that property values near the upper Milwaukee River increased after the cleanup efforts, particularly following reductions in PCB concentrations. Considering all residences in the remediated zone, the suggested increase in property value following cleanup amounts to 3%, or $5,683. However, it's important to note that the effects observed primarily pertain to the upper Milwaukee River, and the full restoration of the broader Milwaukee Estuary AOC is still a work in progress. Further research is necessary to confirm the value of fully restoring AOCs based on post-cleanup sales data.
 Wilkinson, Robin, and Richard T. Melstrom. “The Effect of Remediating PCB-Contaminated Sediments on Home Prices in Milwaukee, Wisconsin, USA.” Agricultural and Resource Economics Review 52, no. 1 (2023): 71–88.