The Effects of Environmental Contamination on Real Estate: A Literature Review

By Jackson, Thomas O. | Journal of Real Estate Literature, January 1, 2001 | Go to article overview

The Effects of Environmental Contamination on Real Estate: A Literature Review


Jackson, Thomas O., Journal of Real Estate Literature


Abstract

The literature reviewed in this article reflects the degree to which practitioners and academics are having difficulty in arriving at consistent findings as to the effect of environmental contamination on real estate. The valuation literature in this category deals with appraisal methods, but does not develop a consensus view. The empirical sales price literature is also inconsistent, with disagreement over the existence and magnitude of price impacts, persistence of these impacts and other issues. The article concludes by summarizing the results of these studies with respect to contamination source, effect on sales price, persistence and intervening factors such as strong or weak market conditions.

Introduction

The literature on the effects of environmental contamination on real estate may be divided into two general categories. The first category involves contaminated property valuation concepts and methods. This literature is largely drawn from the appraisal profession, and addresses the notions of stigma, risk and how contamination affects the market value of real property. Most of this literature has focused on defining appropriate methods for valuing contaminated property that recognize the unique risks associated with this property type. Also, the literature in this category is primarily applicable to income-producing, commercial and industrial real estate. To date, however, the valuation literature has offered few empirical studies of contaminated real estate, but rather has focused on how existing appraisal methods can be adapted to estimate the impacts of contamination on market value.

The second literature category presents empirical studies on the effects of contamination and other negative environmental externalities on real estate prices. Studies in this category can be divided into those dealing with the effects of contamination on residential real estate and studies on commercial and industrial real estate. The residential real estate literature is research that is primarily concerned with situations in which the impacted properties are not the source of the contamination, but are affected by contamination generated from other sources and properties. This literature serves as a useful comparison to commercial and industrial property impacts, and also provides important insights into the changes in adverse effects before and after remediation or cessation of the negative externality. This generally welldeveloped literature has evaluated impacts ranging from radioactive waste releases to the announcement of hazardous landfill sitings.

There is a more limited amount of empirical research on the effects of contamination on commercial and industrial properties. Although there have been a number of articles in The Appraisal Journal and elsewhere that discuss valuation methods for contaminated properties, relatively few published studies have been based on the empirical analyses of sales data. One reason for the lack of empirical research, especially in comparison to the residential property studies, is that contaminated commercial and industrial properties have only recently begun to sell with any frequency. As discussed in the some of the literature, in the past the risks perceived by market participants were such that equity and debt capital were generally unavailable for contaminated properties. This situation appears to be changing, and sales data is becoming more available. However, most of the literature reviewed in this category is largely based on a few case studies, rather than on the type of systematic analysis found in the residential studies.

Contaminated Property Valuation

As noted, the first literature category focuses on the concepts and methodology for valuing contaminated property and estimating the effects of contamination on market value. Patchin (1988) laid out the first framework for valuing contaminated real estate. Patchin's framework focused on clean-up costs, the availability of indemnities, equity yield rates and risk premiums, and the costs of financing. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

The Effects of Environmental Contamination on Real Estate: A Literature Review
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.