Evidence of the dual nature of property value recovery following environmental remediation

Abstract

The literature on home value diminution attributable to environmental degradation and its possible reversal typically ignores indirect effects upon neighborhood characteristics that can exacerbate the overall change in property values, resulting in underestimates of diminution and overestimates of recovery. Furthermore, to the extent that direct price effects and neighborhood transition effects respond differently to remediation efforts, the relatively new postremediation literature misses an important part of the recovery process. This study examines both direct and indirect effects and finds in the case of Houston Environmental Protection Agency Superfund sites that, while the direct value impacts of proximity to toxic waste sites was significantly reduced after remediation, the indirect effects associated with induced demographic changes were much slower to reverse, producing a housing market inertia that stifled full home value recovery. © 2008 American Real Estate and Urban Economics Association.