The Value of Clean Air in High Density Urban Areas

We estimate the market value of clean air by examining the impact of air pollution on property prices. We use a three-dimensional Reynolds-stress turbulence model to simulate the air pollution level of each housing unit in high-rise buildings located in a small, densely populated area of Hong Kong (Study Area) and then verify the simulated results with site measurement data. The Study Area has two important features that make our investigation feasible:1) the variety of building forms and street locations resulted in significant variations in air quality across housing units and 2) the housing units are actively traded in the market and their property attributes are relatively homogenous. We estimate the implicit price of air quality by constructing a hedonic price model that includes the simulated housing unit-specific air pollution level as one of the explanatory variables. We found that the level of air pollution, as measured by respirable suspended particulates, has a significant negative impact on housing prices. Our results also suggest that the willingness to pay for clean air increases with air pollution levels and the value of a housing unit