One of the main physical effects of the depletion of aquifers is land subsidence – the lowering of the land-surface elevation as a result of groundwater overdraft. A second effect is the development of earth fissures as a result of the horizontal movement of sediments during subsidence. To determine the value of these effects we investigated the impact of land subsidence and earth fissures on residential property values in Maricopa County, Arizona. Using 82,716 arms-length property sales between 2004 and 2010, we estimated a fixed effects hedonic price model. We found that existing and future land subsidence, and earth fissures had a negative impact on the property values. The mean value of properties located in land subsidence features was lower than those located outside land subsidence features, and the disamenity associated with earth fissures was largest for properties located in land subsidence features.
Table 3 presents estimated percentage home value depreciation associated with (1) existing land subsidence only, (2) earth fissure only, and (3) a combination of earth fissure and existing land subsidence, and (4) future land subsidence only. The results show the value of residential properties in existing subsidence features in Maricopa County to be 9.86% lower than the value of properties outside existing land subsidence zone if no earth fissures are within 500 meters, 11.07% lower than the value of properties outside existing land subsidence features, if there is an earth fissure within 500 meters. Outside existing land subsidence features, the value of properties, is found to be 5.38% lower when there is an earth fissure within 500 meters, and 6.81% lower when properties are in future land subsidence zones. The reduction in the capitalised value of residential properties within existing land subsidence features was $24,570 and $27,646 for, respectively, properties beyond or within 500 meters of an earth fissure. The reduction in the capitalised value of properties outside existing land subsidence features was $18,329 and $19,399 for, respectively, properties within future land subsidence features, or within 500 meters of an earth fissure.
A first approximation of the capitalised value of the subsidence externality of groundwater extraction in the West valley is the mean reduction in house prices in the affected area multiplied by the number of housing units in that area. Using 2010 census data to identify the number of housing units in the West Valley subsidence feature, we estimate the capitalised value of the externality to be $4,327,586,4315 in 2010 dollars. Since the geographical scale of the West Valley subsidence feature is not constant, we can also get a first approximation of the change in the value of the subsidence externality, by investigating the change in the number of residential housing units affected by subsidence. Figure 5 maps the West Valley subsidence feature at intervals in the period 2004–2014. It shows the change in the area affected by subsidence over that period. Using census data to convert this to housing units, and the percentage change in mean property values between 2010 and 2014 to adjust the nominal value of the subsidence externality, a first approximation of the growth in the capitalised value of the externality in the West Valley subsidence features in this period is $875,912,355, the 2014 value of the aggregate externality being $5,203,498,786.
We note that this is very much a first approximation of the cost of the subsidence externality of groundwater extraction, but it does indicate the magnitude of the problem. Land subsidence and Figure 3. Residential properties, existing land subsidence (2004–2010) and earth fissures near the West Valley land subsidence feature. Source: Created by the author using ArcGIS Desktop 10.3. fissures due to groundwater extraction have reduced the capitalised value of housing assets in just one part of the Phoenix Metropolitan area by approximately $1 billion.
by James Yoo & Charles Perrings
Published online: September 6, 2016; 13 pages
Keywords: Land subsidence, earth fissure, hedonic price model, disamenity impact, Maricopa County