Estimating the Marginal Effect of Pits and Quarries on Rural Residential Property Values in Wellington County, Ontario: A Hedonic Approach

Grant, Alison
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University of Guelph

“Aggregate” material – i.e., sand, gravel, clay, and bedrock – are extracted from pits and quarries throughout Ontario. Aggregates are the number one resource extracted (by value) and used by Ontarians, and approximately $1.2 billion of aggregate material was extracted in Ontario in the last year. While aggregate is a valued resource, the extraction of aggregate is often identified as a negative externality. Similar to other environmental disamenities mentioned in the literature – such as shale gas exploration sites, wind turbines and landfills – residents near aggregate extraction identify a host of events that can be categorized as negative externalities. Residential concerns include noise and visual disamenities, as well as environmental concerns, such as diminished water quality. In this study, I assess the potential impacts of aggregate sites. First, I briefly introduce the perceived impacts of aggregate sites by quoting residents’ concerns through newspaper articles and lobby group websites. I then utilize the hedonic model to test these claims made by residents: namely, the negative effect on property values. I estimate average changes in property values (or marginal implicit prices) in close proximity to these sites as a proxy for aggregate site impact. When estimating these marginal implicit prices using the hedonic model, conventional covariates that describe housing and land quality are used. I also include covariates that describe the aggregate site (e.g., activity, licensed area, site type) and spatial attributes that might influence the relationship between the site and the residence (e.g., distance to nearest highway, distance to Toronto). The data set utilized in this thesis includes over 9,000 arms-length sales of rural residential properties in Wellington County in Ontario. These property sales occur over a 12 year period: 2002-2013. Data on the 107 individual pits and quarries in Wellington County were collected through the 2013 Ministry of Natural Resources (MNR) database on licensed aggregate sites. Across various models to test for sensitivity (i.e. flexible functional forms, varying model commands, and focused analysis on the most active sites), I do not find evidence that aggregate sites have a strong negative effect on property values in Wellington County. The empirical evidence found in this study does not support the public claims that aggregate sites are negatively affecting neighbouring property values.

hedonic, aggregate sites, pit, quarry, marginal effect, property values, rural