Contamination by the Israeli Military Industry and its Impact on Apartment Sale Prices in an Adjacent Tel-Aviv Neighborhood: A Hedonic Pricing Model Study
Abstract
A window of opportunity opened to investigate present effects of past environmental
policies of the Israel Defense Forces and its military industry when one of its facilities,
Taas Magen, was required to close down in 1997. For decades, untreated discharge was
released into absorption pits, which contaminated the soil and groundwater with many
toxic compounds, including the carcinogen trichloroethylene. Surrounding the industrial
facility is a housing market, consisting of more than 11,000 apartments, directly
affected by the contamination.
This hedonic pricing model study quantifies the effect of the environmental degradation
due to the operations of Taas Magen on the nearby housing market. This was achieved
by examining the effect distance away from Taas had on apartment sale prices. Results
show that apartments near the facility were more negatively impacted than those further
away. Next, the model was expanded to isolate the impact of the contamination from
that of the facility by incorporating information regarding the public’s awareness
of the degradation. The resulting regression coefficients suggest that only after
public acknowledgement of the harm did distance significantly impact prices. Therefore,
it is the environmental contamination and not necessarily the facility that negatively
impacted prices.
As a result of the contamination, the mean apartment price loss was -$24,650.74 (’06
dollars), which is approximately 14% of an apartment’s average value. Losses to the
surrounding housing market are estimated at $267 to $287 million. These are only a
minimum of the total social and economic costs incurred by the greater community,
which are estimated to total at least $358 million.
Assuming the government were to fund the estimated $33 million cleanup costs, a minute
gain of 1.5% in the value of this $2.2 billion housing market would create the necessary
economic benefit to offset the cost of decontaminating the site. Similarly, a more
technologically advanced, yet expensive, iron nanoparticle remediation process would
require a gain of 10.1% to offset its costs. Such market gains are not unreasonable
given a drastic decrease in environmental harms. Furthermore, reclaiming a lost aquifer,
reduction in human health risks, restoration of environmental integrity, and further
increases to the housing market are all benefits of remediation that may greatly overshadow
the concomitant cleanup costs.
Future research should focus on quantifying all these benefits. With such information
at hand, it will undoubtedly become apparent that remediation is socially and economically
feasible.
Type
Master's projectSubject
environmenthedonics
contamination
housing market devaluation
econometrics
environmental economics
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https://hdl.handle.net/10161/482Citation
Shelem, Itai (2008). Contamination by the Israeli Military Industry and its Impact on Apartment Sale Prices
in an Adjacent Tel-Aviv Neighborhood: A Hedonic Pricing Model Study. Master's project, Duke University. Retrieved from https://hdl.handle.net/10161/482.Collections
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