A new study shows the enormous effect that the EPA's brownfield remediation program has on real estate values in cities.
There are more than 450,000 brownfield sites in the U.S., properties once used for industrial purposes that are now contaminated by hazardous substances at low levels. In 1995, the U.S. Environmental Protection Agency launched the Brownfields Program to provide support for brownfield remediation, an effort that was expanded in 2002, when Congress passed the so-called Brownfields Law. From that law's enactment through fiscal year 2013, the EPA has awarded public and private-sector organizations nearly 1,000 grants for cleaning up these industrial eyesores, for a total of almost $190 million.
Studies have proven the environmental gains that come with infill development on brownfield sites. And there's all kinds of examples that show all the uses to which brownfield sites can be put: transit centers, parks, even new factories. Until now, though, there's never been a measure for the actual value of brownfield remediation nationwide. Is the government getting its money's worth?
According to a new study by the National Bureau of Economic Research, the answer is yessir. Neighborhoods near brownfield cleanup sites, the study shows, enjoy a rise in housing values that can be dramatic.
The paper, which is the work of Kevin Haninger, Lala Ma, and Christopher Timmins, advances recent research into "environmental gentrification"—which the authors describe as "a process whereby changes in the socioeconomic characteristics of a community accompany changes in environmental amenities." While this isn't the first study to try to assess the usefulness of brownfield remediation by measuring changes in nearby property values, this report employs housing data from Dataquick Information Systems to look at brownfield cleanup across the entire EPA Brownfields Program.
It's a difficult trick. The researchers used a quasi-experimental approach to compare housing near brownfield-cleanup sites (the treatment group) with housing in the same county, near the treatment group but not exposed to the brownfield site (the control group). The study considers a number of factors that confound this approach: for example, houses within about 3 miles of a brownfield site tend to be older, smaller, and less expensive than houses outside that range. Then there are the "unobserved" house or neighborhood characteristics that can be correlated with brownfield remediation.
Finally, there's the data: The EPA provided (non-public) data on brownfield cleanup grants from the Brownfields Law's passage in 2002 through 2008. Of the 1,383 brownfield cleanup applications the EPA received, the researchers—after striking applications with missing data and taking other factors like reapplications into consideration—were left with 797 brownfield grant applications (437 funded, 360 not funded).
Successful brownfield cleanups happen too quickly for U.S. Census or American Community Survey housing price data to register in a meaningful way. Dataquick's housing-transaction data, on the other hand, gave the researchers higher "resolution" and "frequency." Of the 797 brownfield applications, there were 327 brownfields associated with housing data on sales and re-sales: 197 funded, 130 denied, and most of them in cities.
Under the most conservative estimates of the cleanup effect and the housing value increase, the NBER study finds an average benefit value of $3,917,192 per brownfield site (with a median value of $2,117,982). According to the report, the Northeast Midwest Institute estimates the average per-site cost for brownfield remediation at $602,000; the EPA provides cleanup grants of up to $200,000.
The authors conclude that, "averaging over the experiences at a nationally representative sample of brownfield properties, cleanup leads to housing price increases between 4.9 percent and 32.2 percent."
Not all the effects are necessarily positive. While neighborhoods near brownfields are more likely to be characterized by minority and low-income households, neighborhoods near brownfield sites that undergo cleanup tend to grow whiter.
But as far as bang for your remediation grant goes, the report is unambiguous: "Taking the most conservative estimate of the value of an average site cleanup, we find that it indeed passes cost-benefit analysis by an order of magnitude based on the expenditures from the Brownfield Program."