literature_review.pdf.
The Effects of Environmental
Contamination on Real Estate: A
Literature
Review
Thomas O. Jackson*
Abstract
The literature reviewed in this article reflects the degree to which practitioners and
academics are having difficulty in arriving at consistent findings as to the effect of
environmental contamination on real estate. The valuation literature in this category
deals with appraisal methods, but does not develop a consensus view. The empirical
sales price literature is also inconsistent, with disagreement over the existence and
magnitude of price impacts, persistence of these impacts and other issues. The article
concludes by summarizing the results of these studies with respect to contamination
source, effect on sales price, persistence and intervening factors such as strong or
weak market conditions.
Introduction
The literature on the effects of environmental contamination on real estate may be
divided into two general categories. The first category involves contaminated property
valuation concepts and methods. This literature is largely drawn from the appraisal
profession, and addresses the notions of stigma, risk and how contamination affects
the market value of real property. Most of this literature has focused on defining
appropriate methods for valuing contaminated property that recognize the unique risks
associated with this property type. Also, the literature in this category is primarily
applicable to income-producing, commercial and industrial real estate. To date,
however, the valuation literature has offered few empirical studies of contaminated
real estate, but rather has focused on how existing appraisal methods can be adapted
to estimate the impacts of contamination on market value.
The second literature category presents empirical studies on the effects of
contamination and other negative environmental externalities on real estate prices.
Studies in this category can be divided into those dealing with the effects of
contamination on residential real estate and studies on commercial and industrial real
estate. The residential real estate literature is research that is primarily concerned with
situations in which the impacted properties are not the source of the contamination,
but are affected by contamination generated from other sources and properties. This
literature serves as a useful comparison to commercial and industrial property impacts,
and also provides important insights into the changes in adverse effects before and
after remediation or cessation of the negative externality. This generally well-
*Real Property Analytics, I
commercial appraiser, commercial appraisal, commercial appraiser la
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