The Economic Value of Environmental Amenities in Zillow Neighborhoods

Urban environmental amenities ("green spaces") provide mutually supportive outcomes for both people and nature. It is important to quantify the economic impacts of urban environmental amenities in order to justify the cost of their creation and maintenance; accordingly, valuation studies of environmental amenities have become increasingly popular, not only because of the timeliness of their implications, but also because of advances in available data (e.g., satellite remote sensing) and methods (e.g., spatial econometrics). In this study, we implement the hedonic pricing method at a national scale, using Zillow neighborhoods as our unit of observation. We analyze over 4,000 Zillow neighborhoods located in metropolitan areas across 45 states in order to identify the marginal value of urban environmental amenities with respect to home prices. First, we establish a baseline spatial autoregressive model by regressing seasonally-adjusted home price estimates against (i) structural (e.g., home age, number of rooms); (ii) socio-demographic (e.g., median household income, education); and (iii) location (e.g., school, highway) characteristics of each neighborhood. We then add to the model (iv) remote sensing environmental amenities (NDVI, tree canopy coverage, land surface temperature) and (v) binary environmental amenities (e.g., parks, golf courses). We find that parks and tree canopy cover have significant and positive effects on average neighborhood home value; meanwhile, NDVI has a significant and negative impact on home prices. Furthermore, an interaction term between land surface temperature and tree canopy cover is significant and positive. Our results suggest that while urban greenness is itself a dis-amenity, the amenity value of greenness can be realized by (1) curation of green spaces (i.e., parks) or (2) its utility as a temperature-regulating service (i.e., tree shading). Our research highlights the critical role of city planners to optimize both the ecological benefits of urban environmental amenities and the real estate interests of residents, particularly at a time when cities are becoming warmer and more populated.