The Opportunity Cost of Coastal Land-Use Controls: An Empirical Analysis

Author(s): George R. Parsons and Yangru Wu

Source: Land Economics, Vol. 67, No. 3 (Aug., 1991), pp. 308-316
Published by: University of Wisconsin Press
Stable URL: http://www.jstor.org/stable/3146426
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The Opportunity Cost of Coastal Land-Use Controls:
An Empirical Analysis

George R. Parsons and Yangru Wu

I. INTRODUCTION We use a method previously used by Ed-

wards and Anderson (1984) and Shabman
and Bertelson (1979). First, we estimate a
For more than a decade demographers
have been documenting the migrationhedonic
of the price regression for housing using
U.S. population from interior to cross-sectional
coastal data from a developed
states. A belief that this trend will coastal market similar to that where land-
persist
has led to concern about increased use controls are being considered. Included
housing
and commercial development in coastal in this regression are amenities unique to
ar-
eas. Added development brings water housing
pol- in the coastal area-view of the
lution and reduces the natural cover of the water, frontage on the water, and nearness
coastline. Many states have responded to to the water. Next, we predict the number
this trend with land-use controls that limit of new houses that would have been built
new residential and commercial develop- in the coastal area without controls but are
ment on land adjacent to coastal water. built elsewhere with controls. These are
Controls such as these have essentially "displaced" houses. Last, using the he-
three economic efficiency effects. First, on donic regression, for each displaced house
the positive side, is the preservation of we predict the lost value of no longer hav-
coastal open space and reduction of water ing amenities unique to the coast. Summing
pollutants-benefits enjoyed by residents these lost values over all displaced houses
and visitors. Second, and on the negative gives the total loss. In Shabman and Bertel-
side, is decreased residential and commer- son's terminology this is lost "development
cial proximity to the coast-fewer house- value."
holds and businesses can locate near the The reasoning of the method is that con-
trols reduce households' implicit consump-
waterfront. Third, and also on the negative
side, is a potential loss of amenities at tion
in- of certain coastal amenities by the
land locations. With greater development number
in of displaced houses, and the value
inland areas following controls, there mayof each lost amenity may be approximated
by its hedonic price in existing housing
be increased housing density and less pres-
ervation of inland natural sites. Another markets.
possible effect, which may be positive orThe two efficiency effects that we do not
address-added open space and inland
negative, is a change in infrastructure--
highways, sewage services, police services,
externalities-are ignored for methodologi-
and so on. If these services, on net, change
or the cost of providing them changes,
there is yet another efficiency effect. Parsons is assistant professor, College of Marine
We estimate the cost of the second effi-Studies and Department of Economics, University of
ciency effect-displaced residential devel-Delaware, and Wu is a graduate student, Department
of Economics, Ohio State University.
opment or lost access to coastal amenities.
We thank A. Myrick Freeman, III, William
We analyze controls recently established in
Fischel, Mary Jo Kealy, Eran Feitelson, and two
Maryland for the Chesapeake Bay-the anonymous referees for comments; Richard Sacher for
Critical Area Program which limits new de-programming assistance with the Box-Cox regres-
velopment in a 1,000 foot buffer zone abut-sions; and Jimmy and Anne Talkington for helping us
obtain our data set. The research was funded by
ting the water. We consider one county, NOAA Office of Sea Grant, Department of Com-
Anne Arundel, and ignore displaced com- merce, under Grant No. NA86AA-D-56040 (Project
mercial development. No. SG87 R/CB-2).

Land Economics - August 1991 - 67(3): 308-16

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67(3) Parsons & Wu: Land-Use Controls 309

access amenities
cal reasons. Policy analysts may be approximated
certainly would by
want such measures to make rational deci- equation [1]-the revealed price of the
sions. Unfortunately, our data set limits usamenities in the coastal housing market
without controls noting that the Critical
to a narrower question, but one that is still
of relevance to policy. Area extends .2 miles from the water. (See
Edwards and Anderson [1984] and Shab-
II. THE OPPORTUNITY COST OF man and Bertleson [1979] for a similar mea-
DISPLACEMENT sure of lost access amenity value.)
If N such houses are displaced by the
Our measure of the cost of displacement
controls,
1, of
is based on a hedonic price analysis v =the1,the
d =loss
d') is simply
- pj(x, f j'=l
= 0,[pj(x,
v = f0,=
d = .2)]. Since
Anne Arundel County housing market. We houses may be displaced
estimate a hedonic regression using
for cross-
many years following the controls, the
sectional data from that housing market
total discounted lost amenity value is
prior to the introduction of controls. The
hedonic includes several structural and lo- LOSS =
T N,
cational features of houses that will be de-
fined in the next section. For now, we de- [P,(x,f 1,v ,= 1,d =d')
note these features by the vector x. We alsot=0 j=l
include three coastal access amenities in
- ptj(x,f = 0, v = 0, d = .2)]/(1 + r)t[2]
the hedonic: a dummy for frontage (f = 1
if a house has frontage on the coast, 0 if
where N, is the number of houses displaced
not); a dummy for view (v = 1 if a house
in year t, t = 0, .. . , T with the first year
has a view of the water, 0 if not); and near-
following the controls being t = 0, and r is
ness to the coast (a linear measure of dis-
the rate of discount. LOSS is in terms of
tance, d, in miles from the water). Our he-
"year 0" dollars. Equation [2] may also be
donic then is p(x, f, v, d) where p is the
written as
price of a house. Implicit prices of coastal
access amenities are easily calculated using
LOSS =
this hedonic price function. For example, T

the implicit market price of having a house

SNE[pt(x,f = 1, v =1, d = d')
near the water with view and frontage ver-
t=o

sus having a house with no view or frontage - p,(x,f = 0, v = 0, d = .2)]/(1 + r)'

and being .2 miles from the water is [2']

Ap = p(x,f = 1, v = 1, d = d') where E[pt(x,f = 1, v = 1, d = d') - p,(x,

- p(x,f = 0, v = 0, d = .2) [1] f = 0, v = 0, d = .2)] is the mean value
of the N, displaced houses in year t. The
where d' (<.2) is how far the house is lo- subscript j has been suppressed.
cated from the coast. Ap is a measure of If controls displace some coastal houses
the discounted future implicit market value that would not have had frontage or view
of these coastal access amenities. (houses that would have been near the wa-
Now consider how coastal land-use con- ter but were not so close as to have frontage
trols displace houses. Numerous houses or view), equation [2'] may simply be bro-
that would have been built on the coast ken into groups-each group with different
(with frontage and view) had there been lostno
amenity values.
controls are instead built inland (without In our analysis we consider three
frontage and view and at some distance groups: (1) houses that would have had
from the water). For each of these dis- view and frontage, (2) houses that would
placed houses coastal access amenities are have had view but no frontage, and (3)
lost. Structural and other locational attri- houses that would have been less than .2
butes are not. The implicit value of the lost
miles from the coast but with no view or

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 310 Land Economics August 1991

frontage. undeveloped
Equation portions
[2'] is of the
nowcoastline wri
to
three pieces. current markets, we believe this is a rea-
sonable assumption.
LOSS = Third, Ap does not capture the mitigat-
T
ing effect of inland amenity substitutes. If
Z NeE[ptl(x,f= 1,v = 1, d = d') new houses constructed inland following
t=0
controls are built near parks, rivers, and
- Ptl(x,f = 0, v = 0, d = .2)]/(1 + r)t
open spaces that substitute for lost coastal
T
access amenities, this will offset the loss.
S Nt2E[pt2(x,f= O, v = 1, d = d') By virtue of holding x fixed in equation [1]
t=0
we miss this offset.
-Pt2(x,f= 0, v = 0, d = .2)1/(1 + r)t Hence, we qualify our estimates with the
T
assumptions of a small and open market
+ N,3E[Pt3(x,f
t=0
= 0, v = 0, d = d') and future coastal access amenities being
similar to current amenities. And, we inter-
- Pt3(x,f = 0, v = 0, d = .2)]/(1 + r)t
pret it as a measure that misses the mitigat-
[3]
ing effects of households finding inland
where N,t, Nt2, and Nt3 correspond to the amenity substitutes.
number of displaced houses in each of the
groups. E[ptk(') - Ptk(')] is the mean value III. THE DATA AND EMPIRICAL
of the Ntk houses in group k (= 1, 2, or 3) ANALYSIS
displaced in year t.
We estimate LOSS in the following sec- We analyze single-family houses sold in
tion and divide it into 4 parts: Anne Arundel County, Maryland in 1983.
Anne Arundel County is located on the
LOSS = LOSS86-90 + LOSS91-95 western shore of the Chesapeake Bay ap
+ LOSS96 + LOSSo0105. [4] proximately 35 miles east of Washington
D.C. Its major urban areas are Glen Burni
and Annapolis. In 1985 there were 141,000
LOSS86_0o is present value of lost amenity
values due to houses displaced in thehouses
years in the county and it had a populatio
1986 through 1990, LOSS91_95 is for of 412,000.
1991
through 1995 and so on. We presentThe thecounty has 432 miles of shoreline
including
present value of losses for an average year land immediately abutting the
Bay and land abutting three major rivers
in each of these five-year increments.
Under reasonable assumptions, LOSS that feed
is the Bay. The coastline is one of
the most intensely developed on the Chesa-
a defensible estimate. First, if the restricted
coastal area is "small and open" in the peake. We estimate that approximately 80
sense defined by Polinsky and Shavell percent of all housing in the county is lo-
(1976), Ap captures the full value of lost cated within one mile of the shore. Never-
coastal access amenities. The area is theless, more than half of the coastal land
"open" if there is perfect migration
withinbe-
1,000 feet of the water in the Critical
Area is undeveloped.
tween the affected coastal area and other
Our sample is a random draw of 1,435
housing markets in the region. It is "small"
houses located less than six miles from the
if it has an insignificant effect on the overall
supply and demand for land for housingcoastline
in that sold in 1983. (The Commis-
the region. Insofar as the controls applysion
to was announced in December 1983
and established in 1984.) Any observation
only a 1,000 foot strip of land by the water,
we believe the small and open assumption with missing data on characteristics, tha
is reasonable. were not market sales, or that we could no
Second, using Ap assumes coastal ac-locate on a map were deleted-approxi-
mately 5 percent of the data. Table 1 de-
cess amenities in current markets are simi-
lar to what these amenities would be in fu-
fines our variables. The sale price and
ture markets. Given the similarity of the structural characteristic data are from the

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67(3) Parsons & Wu: Land-Use Controls 311

TABLE 1
DESCRIPTION AND MEAN VALUE OF VARIABLES USED IN THE 1983 REGRESSIONS

Standard
Variable Description Mean Deviation

PRICE Market price of a house 91,555 55,284

BD Number of bedrooms 3.26 0.80
BATH Number of bathrooms 1.76 0.60
DINED Dummy variable (1 = formal dining room) 0.40 0.49
BASED Dummy variable (1 = full basement) 0.36 0.48
AGE Age of a house (years) 16.55 18.18
HISTDUM Dummy variable (1 = historic neighborhood) 0.007 0.08
GARAGE Dummy variable (1 = garage or carport) 0.40 0.49
AIRCON Dummy variable (1 = central air conditioning) 0.59 0.49
FRPL Dummy variable (1 = fireplace) 0.52 0.50
SF Interior area of house (square feet) 1,672 733
LOTSZ Area of lot (square feet) 23,755 12,305
MONTH Month the house was sold

(1 = January, .... 12 = Decem

DISTANCE Linear distance to the nearest point on the Bay or
tributary (miles) 0.61 0.71
DISTCBD Distance to central business district (miles) 4.39 3.43
FRONTAGE Dummy variable (1 = water frontage) 0.09 0.28
VIEW Dummy variable (1 = water view) 0.12 0.33
ED Percent of blockgroup over 18 years old with 4
years high school education or more 48.9 8.29
%NWH Percentage of blockgroup classified as non-white 8.9 12.95
HHINC Median household income of blockgroup 25,827 6,571

County Board of Realtors. The locational

signs and are statistically significant in each
regression.data
variables are census (block group) For a and
similar focus on coastal
our own measures of distance to the Cen- amenities in a hedonic regression see Ed-
tral Business District (CBD) and coastline.wards and Anderson (1984); Shabman and
The FRONTAGE and VIEW variables are Bertelson (1979); Milon, Gressel, and Mul-
from the County Board of Realtors which key (1984); and Brown and Pollakowski
we verified for a random draw from our (1977).
sample. Using these results we estimate the
Our estimates of the hedonic regression value of lost coastal access amenities used
(the p(x) to be used in equation [3]) are in equation [3] for each of our three housing
given in Table 2. We estimated three func- groups. We assume
tional forms: Linear, Double-Log, and Lin-
ear Box-Cox. In the Linear Box-Cox, 0 E[Ptl(x,f = 1, v = 1, d = d')
transforms price and X transforms explana-
- p,t(x,f = 0, v = 0, d = .2)]
tory variables. In both the Double-Log and
the Box-Cox a one is added to AGE, DIS-
TANCE, DISTCBD, and %NWH because =(1/M1) [pi(x,f = 1, v = 1, d = d')
some observations have a value of 0 for - pi(x,f = 0, v = 0, d = .2)]
these variables. The dummy variables are, for all t for group 1,
of course, not logged in the Double-Log or
transformed in the Box-Cox. E[Pt2(x,f = 0, v = 1, d = d')
For all of the regressions our chosen set - Pt2(x,f = 0, = 0, d = .2)]
M2
of attributes explain a considerable portion
of the variation in housing prices and for = (1M2) [p(x,f = 0, v = 1, d = d')
the most part have estimated coefficients
with expected signs. The coefficients on - Pi(x,f = 0, v = 0, d = .2)]
frontage, view, and distance have expected for all t for group 2,

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 312 Land Economics August 1991

TABLE 2
HEDONIC REGRESSIONS, 1983

Linear
Variable Linear Double-Log BOX-Coxa

INTERCEPT -42,742(5.8) 4.8(16.5) 4.6(297)

BD -11.6(0.0) .06(2.3) .009(3.1)
BATH 6,742(3.1) .1(4.3) .01(5.1)
DINED 7,674(4.0) .05(4.1) .007(3.9)
BASED -1,056(0.5) .003(0.2) .001(0.9)
AGE 3.3(0.1) - .06(10.7) - .004(9.8)
HISTDUM 46,237(4.0) .6(9.3) .08(8.5)
GARAGE 9,841(4.7) .08(6.0) .01(6.4)
AIRCON 5,298(2.3) .05(3.4) .007(3.6)
FRPL 3,053(1.4) .08(6.2) .01(6.5)
SF 29.3(16.4) .4(14.6) .007(14.1)
LOTSZ .08(10.5) .1(17.6) .001(17.1)
MONTH 338(1.2) .03(3.4) .003(4.0)
DISTANCE -2,326(1.7) - .07(4.2) - .008(3.8)
DISTCBD - 1,053(3.7) -.06(7.7) -.005(6.8)
FRONTAGE 66,880(17.7) .4(18.1) .06(18.1)
VIEW 7,418(2.3) .07(3.5) .0096(3.4)
ED 789(5.1) .06(3.8) .01(7.1)
%NWH 220(2.9) .02(4.2) .002(3.8)
HHINC .6(3.0) .2(8.1) .002(5.7)

R2 .64 .79 .79

F-Statistic 132 275 283
Observations 1,435 1,435 1,435

Note: t-statistics are in parentheses.

aBox-Cox parameter estimates are K = .26 a

E[Pt3(x,f = 0, v = of0,lost access

d = amenities
d') for group 1 houses
is $96,672/house. These are houses that
- Pt3(x,f= 0, v = 0, d = .2)]
lose frontage, view, and .2 - d' miles of
access. For group 2 the average loss is
= (1/M3) [pi(x,f= 0, v = 0, d =
$6,553/house. These are houses that lose
d')
- Pi(x,f= 0, view
v and
= .20,
- d' miles.
d = And, for group 3
.2)]
for all t the average
for grouploss is $447/house.
3. These
houses only lose .2 - d' miles of access.
The set i = 1, . .
We .
use , M,
these implicitis
valueshouses
to estimate the in
sample that are less than five years
cost of displacement. o
have frontage and view. The sets i = Next, we predict the N,,, N2t, and N3,
1, . . . , M2 and i = 1, . . . , M3 are the
for t = 0,... , T-the number of displaced
counterparts for groups 2 and 3. We use houses in each group for years t = 0
new houses because all displaced houses through T. To do this we use an estimate
are new. Appendix Table 1 presents means of the total number of houses expected to
and standard deviations for the housing be built in Anne Arundel County from 1985
characteristics in each group. to 2005. Then, we consider two scenarios
In these equations, f = FRONTAGE, to predict the proportion of these houses
v = VIEW, and d = DISTANCE in the that would have been built in the Critical
hedonic. The estimated values are pre- Area had there been no controls. Because
sented in Table 3; the calculations for the more than 50 percent of the coastal area in
Box-Cox regression are in the Appendix. In Anne Arundel County is undeveloped and
the Box-Cox regression the average value in desirable locations for housing, we do

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 67(3) Parsons & Wu: Land-Use Controls 313

TABLE 3
AVERAGE VALUE OF LOST COASTAL ACCESS AMENITIES (Measured per House and in 1983 D

Group 1 Group 2
Group 3
Houses losing Houses losing
frontage, view view and Houses losing
and (.2 - d') miles (.2 - d') miles (.2 - d') miles
distance: distance: distance:

p(x, f== 1, v 1, d= d') p(x, f= 0, v = 1, d = d') p(x, f= 0, v = 0, d = d')

-p(x,f = 0, v = 0, d = .2) -p(x, f= 0, v = 0, d = .2) -p(x, f= 0, v = 0, d = .2)
Regression
Linear $74,763 $7,883 $233
Double-Log $82,883 $7,041 $524
Box-Cox $96,672 $6,553 $447

Note: The value of lost amenities for Gro

houses less than 5 years old in Group i (=
characteristics for each group in the samp

Under the 100%

not consider supply Displacement
side constscenario
1,027 houses per year are displaced from
ture development.
Our 100% Displacement scenario as- 1986 to 1990. Under the CBF scenario that
sumes that 34 percent of all houses built in figure is only 211. After the turn of the cen-
the county from 1985 to 2005 would have tury the number of annual displacements
been built in what is now the Critical Area. under the 100 percent scenario is about 500
During the early 1980s, 34 percent of new houses per year compared to about 100
housing construction in the county went houses per year under CBF.
into what is now the Critical Area. Our For the 100% Displacement scenario the
Chesapeake Bay Foundation (CBF) sce- present value (1983 dollars) of losses for an
nario, based on a projection by that Foun-average year from 1986 to 1990 is $19.1 mil-
dation, assumes that 20 percent of all lion. These drop to $5.9 million per year by
houses built in the county would have been the years 2000 to 2005. The decline is due
built in what is now the Critical Area and to discounting and a declining rate of
that with controls 65 percent of these would growth of housing construction. Under the
still be built in that Area. This is a net dis- Chesapeake Bay Foundation scenario the
placement of 7 percent of all new houses. loss is $3.9 million in the earlier years drop-
Certain designated areas in the Critical ping to $1.2 million in the later years. The
Area allow continued construction, and present value of the displacement cost of
there is some grandfathering that allowsthe controls per county resident ranges
controlled areas to have new construction. from $46/year in the early years to $14/year
This scenario accounts for these aspects inof the later years in the 100% Displacement
the controls. scenario, and from $9/year to $3/year per
In each scenario we assume that 20 per- resident in the Chesapeake Bay Foundation
cent of the houses are in group 1, 10 percent scenario.
are in group 2, and 70 percent are in group
3. These are based on historic shares for IV. CONCLUSIONS
these amenities for houses in the county.
The expected growth in housing and ourWe have presented a method for estimat-
displacement scenarios are presented in Ta-the value of lost coastal access ameni-
ing
ties due to land-use controls. The estimates
ble 4. Table 5 divides the displaced houses
into groups of five-year increments. Theare qualified by the assumptions of the are
present value of lost coastal access ameni-
affected by controls being small and open
ties for an average year over the five-year
and by current coastal access amenities be-
increments is presented in Table 6. ing similar to future access amenities. The

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 314 Land Economics August 1991

TABLE 4

HOUSING IN ANNE ARUNDEL COUNTY, 1985-2005

1985 1990 1995 2000 2005

Projected Number of Houses

in Anne Arundel County:*
Total 141,000 156,100 168,300 178,100 185,400
Average Annual Growth Rate
Over Preceding 5 Years 2.1% 1.6% 1.2% 0.8%
Absolute Change Over Preceding
5 Years 15,100 12,200 9,800 7,300
Annual Average Change Over
Preceding 5 Years 3,020 2,440 1,960 1,460

Average Annual Number of New Houses

in Critical Area Over Preceding 5 Years:
100% Displacement Scenario
Without controls - 1,027 830 666 496
With controls - 0 0 0 0
CBF Scenario
Without controls - 604 488 392 292
With controls - 393 317 255 190

*Projections by Maryland Department

estimatesalso ofignore the

this trade-off, a measure offse
of the opportu-
amenity substitutes at inlan
nity costs of the controls.
displaced houses.
The measure is one piece of the informa-
These results have immediate use for tion required to assess the efficiency of con-
policy. Coastal zoning authorities at state
trols. Insofar as the measure is given per
and local levels are showing increased house,
in- the opportunity cost of alternative
terest in land-use controls as a policy for
control schemes may also easily be com-
protecting coastal open space. Many typespared. We only need to know how the num-
of controls are considered-usually density
ber of displaced houses varies between al-
restrictions or moratoria on development.ternatives. An example might be comparing
In designing such controls, communities alternatives with different density restric-
face the trade-off of lost coastal access
tions. This is a point often hotly debated in
amenities. Our estimate provides a measure
designing controls and a point about which

TABLE 5
AVERAGE ANNUAL NUMBER OF DISPLACED HOUSES IN FIVE-YEAR INCREMENTS

Average Annual Ni,

Years Group 1: Nit Group 2: N2, Group 3: N3, Total

100% Displacement Scenario:
1986-1990 205.4 102.7 718.9 1,027
1991-1995 166 83 581 830
1996-2000 133.2 66.6 466.2 666
2001-2005 99.2 49.6 347.2 496
Chesapeake Bay Foundation Scena
1986-1990 42.2 21.1 147.7 211
1991-1995 34.2 17.1 119.7 171
1996-2000 27.4 13.7 95.9 137
2001-2005 20.4 10.2 71.4 102

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67(3) Parsons & Wu: Land-Use Controls 315

TABLE 6 p = {-.17[4.6 + .009(BD.26 - 1)/.26

PRESENT VALUE OF AVERAGE ANNUAL LOSSES: + .01 (BATH.26 - .1)/.26
OVER FIVE-YEAR INCREMENTS IN 1983 DOLLARS + .007 DINED + .001 BASED
(Millions)
- .004 ((AGE + 1).26 _ 1)/.26
1986- 1991- 1996- 2001- + .08 HISTDUM + .01 GARAGE
Scenario 1990 1995 2000 2005
+ .007 AIRCON + .01 FRPL
+ .007 (SF.26 - 1)/.26
100% Displacement 19.1 13.3 9.2 5.9
Chesapeake Bay + .001(LOTSZ.26 - 1)/.26
Foundation 3.9 2.7 1.9 1.2
+ .003 (MONTH.26 - 1)/.26
Note: Each entry in this table is computed using the Box-
- .008 ((DISTANCE + 1).26 - 1)/.26
Cox implicit values in Table 3 and the estimated number of
displaced houses in Table 5. For -example,
.005 ((DISTCBD
the+average
1).26 - 1)/.26
annual
loss of coastal access amenities from 1986 to 1990 (Annual
+ .06 FRONTAGE + .0096 VIEW
average of LOSS86s9o in equation [4]) under the 100% Displace-
ment scenario is + .01 (ED.26 - 1)/.26
[($96,672 * 205.4) + ($6,553 * 102.7) + ($447 * 718.9)1/
+ .002 ((%NWH + 1).26 - 1)/.26
(1 + .03)3 = $19.1 million. + .002 (HHINC.26 - 1)/.26] + 1}/-.'7.[A1]

This entry is shown in the table above. The 86-90 increment

is discounted from 3 years in the future. The 91-95 increment We rewrite [Al] as
is from 8 years, 96-00 is from 13 years, and 01-05 is from 18
years. We use 3 percent as our real rate of discount.
p = {-.17[C + .06 FRONTAGE
+ .0096 VIEW
- .008 ((DISTANCE + 1).26
there is little information concerning cost
or benefits. - 1)/.26] + 1}1/-'17 [A2]
The measure may have other applica-
where
tions. It may be used to diffuse detractors
that insist opportunity costs approach zero
with little evidence or detractors that insist C = 4.6 + .009 (BD.26 - 1)/.26
costs are inordinately large with little evi- + .01 (BATH.26 - 1)/.26
dence. Such battle lines inevitably form + .007 DINED + .001 BASED
when controls are being debated. The mea- - .004 ((AGE + 1).26 - 1)/.26
sure may also be used to estimate compen- + .08 HISTDUM + .01 GARAGE
satory payments that may be designed for + .007 AIRCON + .01 FRPL
landowners holding coastal land that is des-
+ .007 (SF.26 - 1)/.26
ignated restricted for development by the
controls. It may even be used in the devel- + .001(LOTSZ.26 - 1)/.26
opment of payments for a transferable de- + .003 (MONTH'26 - 1)/.26
velopment right scheme. - .005 ((DISTCBD + 1).26 - 1)/.26
We believe our findings provide eco- + .01 (ED.26 - 1)/.26
nomic information that may aid in rational + .002 ((%NWH + 1).26 _ 1)/.26
policy-making and does so in an area of en- + .002 (HHINC.26 - 1)/.26.
vironmental control where such informa-
tion seems to be unusually scarce. Substituting the appropriate values for DIS-
TANCE + 1 (d), FRONTAGE (f), and VIEW
(v), our measure of Ap for a house in each group
APPENDIX is
CALCULATION OF IMPLICIT PRICES OF COASTAL
ACCESS AMENITIES USING THE Box-Cox
REGRESSION Ap1 = {- .17[C, + .06(1) + .0096(1)
- .008(d.26 - 1)/.26] + 1}'/-.7
The Box-Cox hedonic with X = .26 and 0 = - {-.17[C, + .06(0) + .0096(0)
-.17 is - .008(1.2.26 - 1)/.26] + 1}"/-'7

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 316 Land Economics August 1991

APPENDIX TABLE 1
MEAN VALUES OF VARIABLES IN THREE HOUSING GROUPS

Means for Means for Means for

Group 1 Houses Group 2 Houses Group 3 Houses
BD 3.4 3.3 3.2
BATH 2.4 2.1 2.1
DINED .6 .3 .4
BASED .4 .3 .4
AGE + 1 1.6 2.5 2.5
HISTDUM .05 0 .01
GARAGE .6 .4 .4
AIRCON .8 .9 .9
FRPL .6 .6 .5
SF 2,372 1,655 1,764
LOTSZ 26,552 12,863 15,450
MONTH 6.9 6.3 6.2
DISTCBD + 1 4.8 6.3 5.1
ED 54.3 49.4 49.5
%NWH + 1 11.0 10.1 11.0
HHINC 29,220 26,883 25,537
DISTANCE + 1 1.104 1.148 1.115
PRICE 225,081 100,047 99,937

of Economics and Statistics 59 (Aug.):272-

AP2 = {-.17[C2 + .06(0)
78.
+ .0096(1)
- .008(d.26 - 1)/.26] + 1}1/-.17
Chesapeake Bay Foundation. 1986. "An Analy-
- {-.17[C2 + .06(0) + of
sis of the Impacts .0096(0)
Housing Availability
- .008(1.2.26 - 1)/.26] + l}1/-.17
and Local Economy." Maryland Chesapeake
Ap3 = Bay Critical Area +
{-.17[C3
.06(0) Program,
+ January.
.0096(0)
Edwards, S.,
- .008(d.26 - 1)/.26] + l}1/-'17and G. Anderson. 1984. "Land
Use Conflicts in the Coastal Zone: An Ap-
- {-.17[C3 + .06(0) + .0096(0)
proach for the Analysis of the Opportunity
- .008(1.2.26 - 1)/.26] + 1}1/-.17
Costs of Protecting Coastal Resources."
Journal of Northeastern Agricultural Eco-
where Api refers to group i. Ci is calculate
nomics (Apr.) 73-81.
the values of all other explanatory variab
Maryland Department of State Planning. 1985.
the relevant house in the subsample for g
"Projections for Maryland's Subdivisions."
In each group our subsample is the set o
In Development Planning Series '85. Oc-
houses (less than fivetober.
years old) that sold
1983. Means of the explanatory variables
Milon, W. J., J. Gressel, and D. Mulkey. 1984.
subsample for each group is given in Ap
Table 1.
"Hedonic Amenity Valuation and Functional
Form Specification." Land Economics 60
A Api is calculated for each house in the sub-
(Nov.):378-87.
sample for group i. The mean value of Api across
Polinsky, A. M., and Steven Shavell. 1976.
the subsample for each group is given in Table
"Amenities and Property Values in a Model
3 and used in our displacement estimates.
of an Urban Area." Journal of Public Eco-
nomics 5:119-29.
Shabman, L., and M. K. Bertelson. 1979. "The
References
Use of Development Value Estimates for
Coastal Wetland Permit Decisions." Land
Brown, G. M., Jr., and H. O. Pollakowski. 1977. Economics 55 (May):213-22.
"Economic Valuation of Shoreline." Review

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