Valuing Sunshine

23 Pages Posted: 6 Jul 2017

See all articles by David Fleming

David Fleming

Motu Economic and Public Policy Research Trust

Arthur Grimes

Motu Economic and Public Policy Research Trust

Laurent Lebreton

Independent

David C. Maré

Motu Economic and Public Policy Research Trust; University of Waikato - Economics

Peter Nunns

Independent

Date Written: June 29, 2017

Abstract

Sunlight influences people’s real estate decisions, but city intensification may reduce sunlight exposure for neighbouring properties, causing a negative externality. There are hitherto no rigorous estimates of the cost of this externality. Using over 5,000 observations on house sales in Wellington, New Zealand, we derive the willingness to pay for an extra daily hour of sun, on average, across the year. After controlling for locational sorting and other considerations in an hedonic regression, we find that each extra daily hour of sunlight exposure is associated with a 2.4% increase in house sale price. This estimate is robust to a variety of alternative specifications. Our results can be used to price negative externalities caused by new development, so replacing inflexible regulations designed to address impacts of development on neighbours’ sunshine.

Keywords: Sunlight, house prices, hedonic model, views, elevation

JEL Classification: R30, R31, N50

Suggested Citation

Fleming, David and Grimes, Arthur and Lebreton, Laurent and Maré, David C. and Nunns, Peter, Valuing Sunshine (June 29, 2017). Available at SSRN: https://ssrn.com/abstract=2997312 or http://dx.doi.org/10.2139/ssrn.2997312

David Fleming (Contact Author)

Motu Economic and Public Policy Research Trust ( email )

Level 1, 93 Cuba Street
P.O. Box 24390
Wellington, 6142
New Zealand

Arthur Grimes

Motu Economic and Public Policy Research Trust ( email )

19 Milne Terrace
Island Bay
Wellington 6002
New Zealand

Laurent Lebreton

Independent ( email )

David C. Maré

Motu Economic and Public Policy Research Trust ( email )

PO Box 24390
Wellington, 6021
New Zealand
64-4-9394250 (Phone)

HOME PAGE: http://www.motu.org.nz

University of Waikato - Economics

New Zealand

Peter Nunns

Independent ( email )

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