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Predicting the impacts on residential property values from changes in water quality

Eutrophication is the accelerated aging process of a lake which
generally decreases the water quality in terms of aesthetic and recreational
uses. At Liberty Lake, near Spokane, Washington, eutrophication
has become a problem. Many individuals and agencies are interested in
the benefits that occur when the lake's water quality has improved.
In this research the benefits to private property owners were
measured at Liberty Lake. Three methods — present sales, appraised
value and personal interview — were compared and empirically tested to
determine the economic benefits to private property owners as well as the
overall community impact. For this study property was defined as land,
buildings and other improvements.
Current market sales and appraised values at six different lakes,
each with different water quality levels, were used as the dependent
variables for the present sales and appraised value methods. The dependent
variables were regressed against several factors including physical
(.housing, neighborhood, accessibility, and environmental characteristics)
to estimate the effect water quality had on property values. A quadratic
and double logarithmic function were examined. In the results a positive
relationship was found between water quality and the dependent variables.
A 100 percent increase in the water quality ranking resulted in
a $3,800 increase in the sales price per lot and $884 increase in the
appraised value per lot for the quadratic function.
Separate equations were determined for vacant lots. The dependent
variables were the same, but only neighborhood, accessibility and environmental
characteristics were used to estimate the effect water quality had
on property values. In the quadratic form with a 100 percent increase in
the water quality ranking, sales price increased $556 per lot and appraised
value increased $782 per lot.
In the personal interview method home owners at Liberty Lake were
interviewed and asked for how much they would be willing to buy and sell
a particular home at different water quality levels. The differences
between the two buying and selling prices were the estimated impact of a
change in water quality and totaled $4,795 and $5,679, respectively.
Both differences were significant at the one percent level. The buying
price difference was used when comparing the personal interview method to
the other methods, since it was less likely to overestimate the water
quality effect.
This research used the best water quality index available, but there
is a definite need for future research to develop a uniform water quality
index. / Graduation date: 1980

Identiferoai:union.ndltd.org:ORGSU/oai:ir.library.oregonstate.edu:1957/26702
Date18 April 1980
CreatorsDoverspike, Mark Steven
ContributorsGibbs, Kenneth C., Stoevener, Herbert H.
Source SetsOregon State University
Languageen_US
Detected LanguageEnglish
TypeThesis/Dissertation

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