The Value of Ozone Air Quality Improvements to Renters: Evidence From Apartment Building Transactions in Los Angeles County

We investigate the relationship between the sale prices of apartment buildings and ozone levels in Los Angeles. The hedonic estimation controls for the potential bias resulting from the endogeneity of air pollution measures. We find that renters' valuations for air quality are capitalized into the asset price of apartment buildings. For a 1% reduction in the 1990 ambient air pollution level, renters' annual marginal willingness to pay (MWTP) is estimated at $14 to $52 in constant 2010 dollars. These estimates are somewhat smaller than current MWTP estimates from the owner-occupied single family house literature.