Journal of Real Estate Finance and Economics, 22:2/3, 135±139, 2001
# 2001 Kluwer Academic Publishers. Manufactured in The Netherlands.
Real Estate and the Environment: An Introduction
Department of Economics, University of Connecticut, Storrs, CT 06269-1063
The last three decades have seen a surge in research on the economic dimensions of
environmental protection and the use of environmental resources. This research has been
in response to growing concerns at the local, regional, national, and international levels
about the need to protect environmental assets and to ensure that environmental resources
are used wisely. The ®eld of environmental economics is now a well-established sub®eld
of economics devoted to the study of these issues.
Many environmental problems relate to the use of land and thus have implications for
land markets and real estate. An obvious example is the impact of environmental amenities
(e.g., open space or proximity to parks) or environmental disamenities (e.g., air pollution,
water pollution, or proximity to noxious facilities) on housing prices through
capitalization. When two housing units are identical in all respects except an
environmental attribute, the unit with the preferred attribute (e.g., better air quality or
greater proximity to the park) can be expected to sell for a higher price. That is, the value
that individuals place on the improvement in the environmental attribute should get
capitalized into the price of the house. This observation forms the basis of the hedonic
pricing models that have been used extensively to study the price impacts of housing
characteristics, including environmental characteristics.
While the link between environmental attributes and housing prices is one example of
the link between the environment and real estate, there are many other examples as well.
These include the environmental implications of ®rm or residential location decisions,
incentives for the abandonment or development of contaminated industrial sites
(brown®elds), liability for environmental contamination of land and structures, the
siting of noxious facilities, the environmental impacts of land-use regulation and
alternative land-use patterns, and the effects of alternative compensation rules for
environmentally driven land-use restrictions (regulatory takings).
The aim of this special issue of the Journal of Real Estate Finance and Economics is to
bring together research in the two related ®eld of environmental economics and real estate
economics. The goal is to promote cross-fertilization between these two ®elds. In
soliciting articles for this issue, we cast the net broadly, seeking articles that would apply
the insights and methods of environmental economics to real estate (broadly de®ned) as
well as those that would apply principles of real estate economics to environmental
problems. The vast majority of the papers that were submitted for consideration focused
on one particular dimension of the link between the environment and real estateÐnamely,
the effect of environmental attributes on housing prices. The collection of papers