Valuing water quality in the US using a national data set on property values

Saleh Mamun, Adriana Castillo Castillo, Kristen Swedberg, Jiarui Zhang, Kevin J. Boyle, Diego S. Cardoso, Catherine L. Kling, Christoph Nolte, Michael Papenfus, Daniel Phaneuf, and Stephen Polasky. (Under review)

Abstract High-quality water resources provide a wide range of benefits but the value of water quality is often not fully represented in environmental policy decisions, due in large part to an absence of water quality valuation estimates at large, policy relevant scales. Using data on property values with national-wide coverage across the contiguous United States, we estimate the benefits of lake water quality as measured through capitalization in housing markets. We find compelling evidence that homeowners place a premium on improved water quality. This premium is largest for lakefront property and decays with distance from the waterbody. In aggregate, we estimate that restoring lake water quality to pristine conditions for the contiguous United States has a value of $25-27 billion to property owners. This study provides credible evidence for policymakers to incorporate lake water quality value estimates in environmental decision making.