Cumulative impacts of polluted urban streams on property values: A 3-D spatial hedonic model at the micro-neighborhood level

Urban streams could concurrently bring about both positive amenities accruing to the view of waterscape and negative disamenities associated with water pollution. In this paper, we focus on a specific question that has not yet been explicitly answered in the extant literature: how to estimate the cumulative impacts of urban streams (which refer to the combined impacts of amenities and disamenities of multiple sources) in high density and high-rise urban contexts. A typical residential apartment complex (comprised of a number of apartment units located in dozens of mid- to high-rise commercial apartment buildings on a contiguous land parcel) in Guangzhou, south China, is used as a case study. A detailed palette of natural amenities and environmental disamenities of two bifurcated streams are quantified via the generalized spatial two-stage least squares (GS2SLS) model. In this model, an originally constructed 3-D spatial connectivity matrix, cube contiguity, is applied to address, in a sophisticated manner, an array of endogenous, exogenous, and error interactions along both horizontal and vertical dimensions that inherently exist in the spatial context of high-rise housing markets. Our results from spatial hedonic models at the micro-neighborhood level demonstrate that homebuyers tend to evaluate urban streams' chemical, physical, and ecological features holistically. A cumulative impact is also found, as homebuyers would like to pay an extra premium for an apartment located farther away from both polluted streams. This study advances the extant literature by contributing to a novel and effective extension of the conventional two-dimensional spatial matrix which can capture the long-ignored spatial correlation existing amongst apartment units located on contiguous floors, as well as a robust estimation of the demand of urban natural and environmental amenities in the gradually rising mid- and high-rise housing market in both developing and developed countries.