Impacts of an Urban Environmental Event on Housing Prices: Evidence from the Hangzhou Pesticide Plant Incident

Abstract

Environmental pollution incidents affect urban residents and the natural environment. This article employs hedonic price models and a difference-in-difference (DID) approach to examine how widely in space an environmental incident affects housing prices and how great this effect is over several time periods. Using the well-known 2014 Hangzhou Pesticide Plant (HPP) pollution cleanup incident as an example, this research confirms the following: (1) This pesticide plant incident depreciated house prices within 3 km by 2.955%, that is by 41,712 yuan, at the 5% significance level. (2) The devaluation persisted even after the removal of the pollution. Our results suggest that environmental events can devaluate nearby properties beyond the extent of the actual pollution by imposing a “quasi-stigma” (negative perception) on these houses. This effect can be persistent and hard to overturn and arises from perceived disamenitities, taints on the properties.