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Valuing Sunshine

David Fleming (), Arthur Grimes (), Laurent Lebreton (), David Maré () and Peter Nunns ()
Additional contact information
Laurent Lebreton: The Modelling House
Peter Nunns: MRCagney

No 17_13, Working Papers from Motu Economic and Public Policy Research

Abstract: Sunlight influences people’s real estate decisions, but city intensification may reduce sunlight exposure for neighbouring properties, causing a negative externality. There are hitherto no rigorous estimates of the cost of this externality. Using over 5,000 observations on house sales in Wellington, New Zealand, we derive the willingness to pay for an extra daily hour of sun, on average, across the year. After controlling for locational sorting and other considerations in an hedonic regression, we find that each extra daily hour of sunlight exposure is associated with a 2.4% increase in house sale price. This estimate is robust to a variety of alternative specifications. Our results can be used to price negative externalities caused by new development, so replacing inflexible regulations designed to address impacts of development on neighbours’ sunshine.

Keywords: Sunlight; house prices; hedonic model; views; elevation (search for similar items in EconPapers)
JEL-codes: R30 R31 N50 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-geo and nep-ure
Date: 2017-06
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http://motu-www.motu.org.nz/wpapers/17_13.pdf

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Journal Article: Valuing sunshine (2018) Downloads
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