Economic Impact of the Hemlock Woolly Adelgid on Residential Property Values.

Abstract

The hemlock woolly adelgid (HWA) is an exotic insect pest that has been causing mortality to eastern and Carolina hemlocks. The HWA is currently established in 15 eastern states and is spreading to other states where these hemlock species are found. Hemlocks are an important natural and cultural resource on many public lands throughout their range, and are widely used as ornamental trees in residential landscapes. To date, the economic impact of the historic and potential future spread of the HWA on private residential property values, has not been quantified. As the eastern hemlock is a commonly planted species in residential landscapes, valued both for its aesthetic beauty and screening purposes, it is hypothesized that hemlock health on an individual's private property will affect that home's value. Furthermore, it is theorized that hemlocks in the area surrounding an individual house are considered neighborhood amenities and will also contribute to residential property values. This research examines the economic impact of HWA on residential landscapes.

A limited number of studies have been conducted to estimate the non-market economic impacts associated with forest insect pests. Most of these studies used contingent valuation methods, asking people to state their maximum willingness to pay for specific forest protection programs. Hedonic property value models can also be used to assess the economic impact of a forest pest by estimating how the value of trees is capitalized into private property values. As far as the author is aware, there has only been one published study to use the hedonic pricing method to estimate economic impacts from forest insect pests.

In this study, the linkage between residential property values and HWA infestation is investigated by employing a hedonic model. Northwestern New Jersey was chosen for the study site as the HWA has already had a significant impact in this area. In addition to structural housing characteristics, environmental variables used in the model include measures of hemlock health resulting from the HWA infestation, types of land cover, proximity to natural areas and the presence of water bodies. Previously interpreted Landsat satellite imagery data, measuring hemlock health on a landscape scale over the past 20 years, was the source for the hemlock variables used in this research.

The analysis for this study spans multiple spatial scales in order to examine both immediate parcel level and larger scale neighborhood effects of hemlock health on the value of homes. Spatial econometric techniques were employed to correct for the spatial dependence found in the data. A general spatial model employing both spatial error and spatial lag terms, with a semi-log functional form was used as the final specification. The results indicate statistically significant signs on hemlock health variables that correspond with the postulation. In the first study area, healthy hemlocks had a positive effect on property values at all spatial scales, while moderately defoliated hemlocks had a negative impact on housing prices. In the second study area, healthy hemlocks contributed positively to housing prices, but only in the larger spatial scale. Dead hemlocks were found to have a negative effect, but were only significant at the parcel level.

Invasive species in this country pose an increasing threat to our natural resources, and their impact needs to be quantified from both an ecological and economic standpoint. This study is innovative, combining the work of landscape ecologists and environmental economists, and extending the application of satellite imagery data in examining natural resource management issues. The assessment of the economic impacts of HWA on residential landscapes will also be useful to forest managers and policy makers concerned with resource allocation decisions concerning investments in forest pest management.