Real estate 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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Groundwater pollution poses a major environmental challenge, especially for the 43 million Americans who depend on private wells for their drinking water. In Florida, about 12% of residents, roughly 2.5 million people, rely on private wells that fall outside the oversight of the Environmental Protection Agency. As a result, homeowners face the risk of exposure to harmful substances such as arsenic, nitrates, and nitrites, which often go unnoticed without proper testing. The state's sandy soil and widespread agricultural fertilizer application further increase the likelihood of contamination. This research concentrates on the Orlando Metropolitan Statistical Area to explore the influence of groundwater pollution on property values. The study is conducted by researchers Jack Keane and Dr. Maureen Cropper from the University of Maryland, along with Dr. Dennis Guignet from Appalachian State University, using data provided by the Florida Department of Health.
The study uses a dataset of 3,908 housing transactions in the Orlando MSA, with a subsample of 1,566 homes that tested their well water before sale. A hedonic pricing model is employed to analyze the relationship between groundwater contamination and property values. Key variables include:
Summary statistics show the average real price of homes in the sample was $268,694 (in 2013 dollars), with an average square footage of 2,043.83. The dataset spans transactions from 1990 to 2013.
The analysis reveals significant financial consequences for homeowners:
This research highlights the economic risk associated with groundwater pollution affecting residents in Florida. Contaminated well water can pose serious health risks and lead to a noticeable decline in property values. The study underscores the importance of conducting well tests, which are available at no cost via the Florida Department of Health. For policymakers, these findings call for increased awareness and stricter regulations to safeguard public health and protect homeowners' investments.
Keane, Jack, Maureen Cropper, and Dennis Guignet. "Groundwater Contamination and Property Values: A Hedonic Price Analysis." University of Maryland College Park, Department of Economics; Appalachian State University, Department of Economics, 2024.