It’s the Smell : How Resolving Uncertainty about Local Disamenties Affects the Housing Market

This study examines how the housing market responds to closing a major, local environmental disamenity when the policy announcement resolves years of uncertainty. Specifically, we explore this question in the context of a surprise announcement to close the Fresh Kills Landfill on Staten Island, New York, which was, at one point, the largest landfill in the world. Empirically, we exploit both spatial variation and the timing of this policy shock, finding the long-awaited announcement to curb this notorious disamenity (i.e. its smell), counter-intuitively, decreased nearby home prices by about six percent relative to the control group. This occurred as homeowners of the previously illiquid homes nearest to the landfill rushed to sell their homes after this uncertainty was resolved, where weekly volume of transactions nearly doubled directly following the announcement. As an additional control, we observe thousands of properties near landfills elsewhere in the U.S. experienced no similar pattern over the same period. Our results suggest that when policymakers resolve uncertainty about (dis)amenities, the immediate effect on prices might be more ambiguous than a demand-oriented story might predict ex ante, as resolution of substantial uncertainty can also be a potent driver of pent-up supply, flooding a market in the short-run