May 30, 2022

Do people value environmental goods? Evidence from the Netherlands

We find strong associations between house prices and environmental factors that are directly noticeable. This mainly concerns noise pollution and the amount of greenery and water in close proximity to a house. The strong negative associations for noise are mainly found in low levels (below 40 dB) and at high levels (above 65 dB). We find positive effects up to 200 meters for the presence of greenery and water. After 200 meters we find no, or only a small negative association with house prices. Surprisingly, air pollution is only weakly related to housing prices. These results follow from research in which we relate house prices to this set of environmental factors.
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We find the strongest price effects for greenery and water within 50 meters of a house. In particular, the price relationship for greenery decreases the further away the greenery is from a house. For example, we see that a 10% increase in the percentage of grass and shrubs (trees) within 50 meters is associated with a 1% to 4% (1% to 3%) increase in house prices. For water, we find that a comparable 10% increase is associated with a 0.5% to 1.5% increase in house prices.

Our results have important policy implications, as they suggest that households have a limited willingness to pay for environmental goods that they do not directly notice. This result is especially relevant for air pollution. Recent studies indicate that health costs are significantly higher than our estimates of what households seem willing to pay for better air quality. This suggests that households are not fully aware of the effects of local air pollution on their health when purchasing their home.

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