It’s the Smell: How Resolving Uncertainty about Local Disamenties Affects the Housing Market

Abstract

This study examines how the housing market responds to closing a major environmental disamenity when the credibility of local policy is highly uncertain. Fresh Kills Landfill (NY) provides a setting to examine this question across two distinct closing ’events’: a surprise announcement in 1996 and the actual implementation of the landfill’s capping in 1997. We find market prices and volumes responded to the policy implementation but not the surprise announcement. The results suggest credibly resolving uncertainty can have a powerful supply effect (and may even outstrip demand), as transaction volumes by the landfill nearly doubled and prices fell following its capping.

Keywords: externalities, real estate microstructure, regression discontinuity, environmental, landfill, disamenity, hedonic, information disclosure

JEL Classification: D62, R31, R32, Q53, H23