Other Natural Resource Economic Studies

Lakeshore Property Values and Water Quality: Evidence from property sales in the Mississippi Headwaters Region.

Researchers from Bemidji State University, in cooperation with the Mississippi Headwaters Board, conducted a study to determine how a one meter change in water clarity impacted shoreline property values.  The study used Hedonic pricing in conjunction with multiple regression analysis to determine the role of water clarity in the price per foot of shoreline property.  The study was meant to parallel earlier studies on this topic conducted in Maine.  The MN study was conducted for $78,000 on 37 lakes in a 9 county region.  Major findings:  Increasing water clarity had less of an impact on price per foot than decreasing water clarity.  A one meter increase in water clarity resulted in a range of property value increases from just over a dollar per shoreline foot to more than $400 per shoreline foot.  A one meter decrease in water clarity resulted in a decrease in property values that ranged from just over a dollar to almost $600 dollars per foot.  On most lakes this represented an overall change in property value from thousands to millions of dollars.  When extrapolated out to the 3700 lakes in the 9 county region, a one meter change in water clarity would result in a change in shoreline property values in the neighborhood of $100 billion.  One interesting finding was that in many cases, shoreline homes that normally have the largest negative impact on water quality (lots of impervious surface, mowed and fertilized turf grass to the shoreline) also sold for the highest prices.  This represents a disconnection between shoreline property management and the reality of lake ecology.  This study can be found at: http://www.mhbriverwatch.dst.mn.us/publications/lakeshore_property.pdf
(pdf 1.7 mb)