Urban-fringe afforestation projects and taxable hedonic values

In 1989, the Danish Parliament announced a forest policy goal to double the forest area within 60-100 years. One of the objectives of this policy was to improve the recreational possibilities for the urban population. Therefore, focus has been on enhancing public afforestation projects close to urban centres with little nearby forest. We know from previous research that mature local forests possess significant amenity values; the question is whether this is also true for afforestation projects. This study examines the residents' willingness to pay (WTP) for proximity to urban-fringe afforestation projects, using a hedonic pricing approach to estimate the effect on house prices in the neighbourhood of two afforestation projects. In both cases a significant increase in house prices in the time of afforestation is found; an increase the larger the closer the house is to the new forest. The study also examines the role of property taxes when the rise is proportional to house prices. The increased annual property tax people expect and are willing to pay in addition to the premium on the house value has to be included in the analysis to avoid serious misestimation of the total welfare economic implications of the afforestation.