Cleaning Up the Rust Belt : Housing Market Impacts of Removing Legacy Pollutants

The Great Lakes and their tributaries make up the largest freshwater system on the planet, providing drinking water and recreational value to millions of people. Yet manufacturing plants have left a legacy of toxic pollutants in the region, creating the stigma of the "Rust Belt." In 1987, the Area of Concern (AOC) Program designated 31 areas in the region as having hazardous water quality. Over 700 million federal dollars have been spent since 2004 on grants to clean up the areas. Our paper is the first to provide causal estimates of the program's impact on local housing markets. We find negative and statistically significant effects of AOC designation, indicating that consumers value clean water and incorporate information about water quality into their housing purchases. We develop two estimators to bound the effects of remediation grants on housing prices. Our estimates imply that the benefits of remediation grants range from $16.9 billion to $25.6 billion, greatly exceeding grant costs