Do oyster farms actually reduce the property values? Empirical evidence from Rhode Island

Abstract

While there in general appears to be public support for shellfish aquaculture operations, the construction of oyster farms often meets opposition where an important argument is devaluation of housing property. This makes it important to study the effect of construction of oyster farms on property value. In this paper house sales data from Rhode Island between 2000 and 2013 is analyzed to evaluate the effect of oyster farm construction on property values using a difference-in-difference (DiD) approach within a hedonic price model (HPM). Given the use of sales data this study focuses on the perceptions of people in the housing market. We found that the impacts are more nuanced and complex: overall on average the construction of oyster farms increased the value of the houses located closer to the farm. When the houses are grouped by their value category, however, our results show that the value of luxury houses decreased significantly.

Keywords:

• Consumer preferences
• difference-in-difference model
• hedonic price model
• oyster farms

Notes

1 The Rhode Island geolocater can be found at http://www.edc.uri.edu/rigis/.

2 We tried a bigger living area and a bigger lot size as the two different proxies for luxury houses. Based on the AIC value, we selected a bigger lot size as the proxy for the luxury house.

3 Census tract is a small and relatively permanent statistical subdivision of a county. The census tract is created by US Census Bureau. It was created to provide a stable set of geographical units for the presentation of statistical data.

4 The distance to the coastline is smaller compared to the distance between the property and the oyster farm. The geographical structure of the oyster farm would substantiate the claim because the oyster farms considered are constructed in the Narragansett bay area.

5 More details about the significance of marginal and conditional R2 can be found on Nakagawa and Schielzeth (2013).

6 Most of the housing market studies showed that house property value will increase with a greater number of bedrooms.