Stigma, risk perception and the remediation of leaky homes in New Zealand

Michael Rehm, Ka Shing Cheung, Olga Filippova and Dipesh Patel

New Zealand Economic Papers, 2020, vol. 54, issue 1, 89-105

Abstract: Stigma has been identified as perceived risks in subsiding the value of properties which are actually or potentially defective. Legal claims are often made under the assumption that remediation itself invokes a form of stigma. This study aims to determine whether this purported post-remediation stigma is a genuine phenomenon or not. In New Zealand, ‘leaky homes’ are defective properties suffering from systemic weathertightness failures. These properties are strongly associated with particular architectural features such as monolithic cladding. These cladding systems attract the general market stigma, which stereotypes all monolithic-clad dwellings, irrespective of leaks or remediation. Using hedonic pricing models, we find that the value of remediated leaky homes is on par with unaffected dwellings. The results stay robust under different model specifications with various counterfactuals used. This challenges the assertion that remediation is a source of stigma.

Date: 2020
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DOI: 10.1080/00779954.2019.1631878

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