Working paper

Description

Beams of light and warmth    
Make a house desirable,    
and we value them

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.

Publication Details
Identifiers: 
ISSN: 
1176-2667
eISSN: 
1177-9047
Issue: 
Motu Working Paper 17-13
Publication Place: 
Wellington, New Zealand
Language: 
English
License Type: 
CC BY
Published year only: 
2017
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