A spatial hedonic analysis of the housing market around a large, failing desert lake: the case of the Salton Sea in California

Abstract

Many lakes around the world exhibit acute environmental stress due to water transfers, persistent droughts, and polluted runoff. In addition, falling water levels worsen air quality by exposing desiccated shores. To our knowledge, however, no published hedonic study has analyzed the costs of deteriorating water quality jointly with the air quality impacts of falling water levels for a large inland water body. We conduct such an analysis for the Salton Sea, the largest lake in California. Our spatial autoregressive models estimated on single-family properties located within 10 miles (16.1 km) of the Sea show that a 1 km reduction in distance to the Sea results in a $595 decrease in the price of a single-family residence. In addition, a 1% increase in annual particulate matter concentration reduces the value of the average family residence by $1,140. These results highlight the vulnerability of poor rural communities to deteriorating environmental conditions.

Keywords:

• water quality
• air quality
• desert lake
• spatial hedonic models
• real estate values

Acknowledgments

Funding and background information from the Salton Sea Initiative at UC Irvine are gratefully acknowledged. We are thankful for many useful comments we received from a number of colleagues including participants at an environmental economics seminar at UC San Diego, Professors Ken Baerenklau and Ariel Dinar from the University of California at Riverside, two anonymous referees, and the associate editor of JEPM for North America (Professor Hilda Blanco). All remaining errors are our responsibility.

Disclosure statement

No potential conflict of interest was reported by the authors.