15 Jun
15Jun

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.

Billings and Schnepel [1] measured the residential value impact of remediation of lead paint in homes in Charlotte, North Carolina. Their study relied on hedonic output results from a difference in differences model specification. The author’s dataset of residential property sales was obtained from the Mecklenburg County Assessor’s Office and included more than 258,000 transactions that spanned from 1995 to 2014. Information on lead-based paint remediation was obtained from Leadsafe Charlotte, a HUD funded program.Lead based paint was prohibited for use by consumers in 1978; many homes built prior to this new law were not required to remediate the health hazard until the property was sold. It is important to note that the presence of lead-based paint is often identified only during the home selling and buying process due to required legal disclosures; various homeowners are not even unaware of its presence and the potential risk to human health. The Charlotte real estate market benefited from over $17 million dollars of federal funding targeted for remediations of more than 2,000 houses from 1998 to 2014. For properties that were remediated, the average cost was $7,291/home, with every $1 payed out on cleanup yielding $2.60 in gains. Billings and Schnepel’s hedonic output presented evidence that lead-paint remediation had a sizeable positive impact to property values. Furthermore, lead remediated homes sold for approximately $26,270 (32%) more than un-remediated homes. When the authors controlled for home improvements associated with remediation, the estimated benefit dropped to $11,629, and equated to a 160% return on investment for remediation costs.  [1] Billings, Stephen B., and Kevin T. Schnepel. “The Value of a Healthy Home: Lead Paint Remediation and Housing Values.” Journal of Public Economics 153 (2017): 69–81.

Comments
* The email will not be published on the website.