18 July 2017
By Madeleine Jepsen
Improvements in water quality in Narragansett Bay have had a positive impact on property values in the surrounding areas and future improvements to water quality could continue to benefit nearby property, a new study finds.
The study combined home price data from 1992 to 2013 for neighborhoods in the Narragansett Bay area in Rhode Island with water quality measurements taken at 13 monitoring sites along the bay. When water quality improved slightly, the researchers found home values increased by 0.1 percent for houses in the 100 meters (109 yards) closest to the shoreline, and 0.08 percent for homes located 100-1,500 meters (109-1,640 yards) from the shoreline. For a $348,000 house, 0.1 percent is equal to a $348 increase in value, and 0.08 percent equal to a $278 increase in value.
Based on the observed relationship between house prices and water quality, the researchers project home values could increase by as much as $18 million to $136 million for the study region as a whole if water quality continues to improve.
“If water quality increases, people are more willing to pay higher prices for houses because they want the benefits of living near higher-quality water,” said Tingting Liu, an Oak Ridge Institute for Science and Education (ORISE) Research Fellow at the U.S. Environmental Protection Agency in Cincinnati, Ohio, and lead author of the new study in Water Resources Research, a journal of the American Geophysical Union. “If water quality is improving, the housing market reflects these changes.”
The study’s results suggest property values could increase if water quality improvement strategies are implemented, especially in areas that currently have poor water quality. Liu said the results could help policy makers prioritize areas that stand to gain the most from water quality improvement efforts in the future.
Improving water quality
Narragansett Bay is New England’s largest estuary, and its area of about 385 square kilometers (150 square miles) makes it as large as the city of Philadelphia. The bay’s watershed, the surrounding area which contributes water to the bay, is more than 10 times larger.
Pollutants in the watershed, mostly from wastewater treatment facilities and runoff from urban areas, resulted in poor water quality in Narragansett Bay over the past several decades. The pollution led to algal blooms and a lack of dissolved oxygen in the bay – both of which harm fish and aquatic plants. In 2003, a fish kill resulted in the death of more than 1 million fish.
“In the past few decades, the water quality was getting worse,” Liu said. “After that [fish kill], people realized the importance of the water quality and started to regulate the nutrient loading coming from the wastewater treatment plant and from other sources.”
Water quality improved after Rhode Island passed a law requiring major wastewater treatment plants to reduce the amount of nitrogen they were putting into the water by 50 percent of 1995 levels. In some parts of the bay, the oxygen available to marine life had returned to normal levels by 2014.
Cleaner water and home prices
In 2016, Liu and her team set out to examine the relationship between property values and water quality in the bay over the past two decades – the first to do so since the potential benefits of improved water quality were estimated 25 years ago.
The researchers used a model to study the effect of water quality on the housing market. The model allowed researchers to relate changes in water quality to the value the house buyers place on different characteristics of the property. By accounting for differences in property such as house size or condition, the researchers were able to isolate the effect of water quality on housing prices.
For the new study, chlorophyll concentration, the green pigment plants produce as part of photosynthesis, was used as an indication of water quality.
Higher chlorophyll concentration means the water may contain elevated levels of nitrogen and other nutrients. Algae and microorganisms thrive on high levels of nitrogen and proliferate, blocking sunlight from reaching other photosynthetic plants in the water that produce oxygen needed by fish. More nitrogen can lead to harmful algal blooms, foul-smelling water and fish kills like the one in 2003.
The researchers found that as chlorophyll levels decreased, home values increased. The researchers found the housing market responded most to extreme events – indicated by chlorophyll levels at or above the 95th percentile – more than fluctuations in the average water quality from year-to-year. For these extreme events, a one-unit decline in chlorophyll concentration leads to a 0.1 percent increase in value for homes in the 100 meters (109 yards) closest to the water – or $200 for a house worth $200,000.
“We think this paper can be very helpful to the policy makers because it shows the people care more about the extreme events than they do the average water quality, and they can make some efforts to prevent the contamination of the water bodies or the damage to the water,” Liu said.
The study’s authors said expressing the benefits of water quality in dollar amounts is especially important in an era when environmental programs are frequently required to demonstrate their value to people.
The researchers also used their results to predict how much of an impact future water quality improvement efforts would have for surrounding neighborhoods. They found that decreasing chlorophyll levels in the water by 25 percent would result in a 0.24 percent or $45.5 million increase in the aggregate value of homes within 1,500 meters (1,640 yards) of the water within one year.
They also found the potential benefit of water quality improvement efforts varied by sub-region along the bay, where areas with poor water quality stand to gain the most drastic improvements in property value. The bay’s large size, tidal flows and river currents cause different regions of the estuary to have different water quality.
For example, the value of houses 1,500 meters (1,640 yards) from the water in Bullock’s Reach sub-region in Providence, which surrounds a channel where water quality has suffered in recent years, would increase by $7.86 million or 0.14 percent. Homes within 1,500 meters (1,640 yards) of the water in the Greenwich Bay sub-region, where the 2003 fish kill occurred, would gain an additional $5.14 million in value, or 0.33 percent.
─ Madeleine Jepsen is a public information intern at AGU.