Sunlight influences people's housing decisions, but city intensification may reduce sunlight exposure for neighboring properties, causing a negative externality. There are hitherto no rigorous estimates of the cost of this externality. Using over 5,000 observations on house sales in Wellington, New Zealand, we derive the willingness to pay for an extra daily hour of sunlight, on average, across the year. After controlling for locational sorting and other considerations in an hedonic regression, we find that each extra daily hour of sunlight exposure is associated with a 2.6% increase in house sale price. This estimate is robust to a variety of alternative specifications in which we test for non-linearities and amplifying factors by interacting sunlight with a range of other influences. Our results can be used to price negative externalities caused by new development, so replacing or augmenting regulations designed to address impacts of development on neighbors’ sunshine.
Fleming, David, Arthur Grimes, Laurent Lebreton, David C Mare, Peter Nunns. 2017. "Valuing Sunshine." Regional Science and Urban Economics. https://doi.org/10.1016/j.regsciurbeco.2017.11.008
Building Better Homes Towns and Cities National Science Challenge