Air Pollution and Rent Prices: Evidence from Wildfire Smoke Plumes

Luis López and Nitzan Tzur-Ilan

No 2502, Working Papers from Federal Reserve Bank of Dallas

Abstract: We leverage quasi-experimental wildfire smoke shocks to analyze the causal effect of air pollution (PM2.5) on rent prices, using satellite-based smoke plumes data and ambient air pollution data. Our results indicate that the rent of homes that are not directly affected by wildfires but exposed to wildfire plumes declines by about -2.4% per one standard deviation increase in PM2.5. The response of home prices is more than threefold highlighting a gap in the tolerance of poor air quality, which we find is driven by age-related differences between tenants and homeowners. We further show evidence that air pollution affects liquidity and search frictions in the rental market.

Keywords: Air Pollution; rental housing; house prices; wildfires (search for similar items in EconPapers)
JEL-codes: Q52 Q53 R21 (search for similar items in EconPapers)
Pages: 48
Date: 2025-01-08
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Persistent link: https://EconPapers.repec.org/RePEc:fip:feddwp:99421

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DOI: 10.24149/wp2502

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