Forest Disturbance Impacts on Residential Property Values

Natural environments and the amenities they offer have fueled much of the population growth in the rural United States (Deller et al. 2001, English et al. 2ooo). In fact, the fastest growing counties in the United States during the early 1990s were non-metropolitan counties that were destinations for retirees or that offered outdoor recreation opportunities (Johnson and Beale 1994). Migration to these rural and exurban areas from urban and suburban locations, along with growth in the United States population, has resulted in an increased mixing of humans, their artifacts, and natural environments. These expanding interface and intermix areas expose more lives and property not only to desirable natural amenities, but also to natural disturbances and disamenities. Households choose the type and amount of natural amenities, along with other structural, neighborhood, and environmental characteristics, in their location decisions. These amenities, such as access to recreation, viewshed, and air and water quality, are capitalized by housing markets into prices. Wildfires, pest outbreaks and other natural disturbances can alter the quantity and quality of amenities available to the household. Damage or destruction of the property itself or any of the surrounding amenities by natural disturbances affects that property's value and if the impacts are widespread, the broader property market is impacted as well. Even in the absence of a disturbance event, property markets respond to the presence of disturbance risk alone since this risk represents the potential for future damages to property and natural amenities. In the context of this chapter, risk will refer to both the probability of a disturbance event and the probability of the loss associated with an event. The primary theoretical framework for studying the relationship between a property's portfolio of characteristics and its price is based on the hedonic model of Rosen (1974). The application of this theory to property markets is known as the hedonic property model (HPM). The empirical use of the HPM in the literature is extensive as it is a popular method to explain the effect of trees, forests, and