Source: UNIVERSITY OF NEVADA submitted to NRP
NON-MARKET CONSEQUENCES OF TRPA REGULATION ON HOUSING PRICES FOR PROPERTIES SURROUNDING LAKE TAHOE
Sponsoring Institution
State Agricultural Experiment Station
Project Status
COMPLETE
Funding Source
STATE
Reporting Frequency
Annual
Accession No.
0204385
Grant No.
(N/A)
Cumulative Award Amt.
(N/A)
Proposal No.
(N/A)
Multistate No.
(N/A)
Project Start Date
Jul 1, 2005
Project End Date
Jun 30, 2006
Grant Year
(N/A)
Program Code
[(N/A)]- (N/A)
Recipient Organization
UNIVERSITY OF NEVADA
(N/A)
RENO,NV 89557
Performing Department
RESOURCE ECONOMICS
Non Technical Summary
Currently homeowners around Lake Tahoe have spent both a tremendous amount of time and money to alleviate the burden of their increasing property tax bill. The contention is that properties that have not been recently sold, and therefore do not have a recent market valuation, are being assessed at values that far exceed the actual market price. In addition, regulations imposed by the Tahoe Regional Planning Agency (TRPA), in an effort to control environmental quality, might limit the future value of the home by restricting the types of renovations and landscaping a homeowner may implement. The repercussions of overvaluing homes are quite extensive. If houses around Lake Tahoe are indeed overvalued then a correction for this would likely reduce property tax revenues. A reduction in revenues would lead to a modification of services that the community can provide to its residents, including those households not living around Lake Tahoe. Furthermore, if the overvaluation is not corrected, in addition to the continuation of strict TRPA regulations, the appeal of owning a home in Lake Tahoe may fall encouraging current homeowners to sell their house and future homeowners to purchase properties elsewhere. This analysis utilizes data from the assessor's office to estimate the implicit prices of structural and locational attributes that are not valued on the market. These prices are then used to provide a better expectation of the market price of houses and in turn will determine the property tax base for homes around Lake Tahoe.
Animal Health Component
50%
Research Effort Categories
Basic
25%
Applied
50%
Developmental
25%
Classification

Knowledge Area (KA)Subject of Investigation (SOI)Field of Science (FOS)Percent
6056010301050%
6056040301050%
Knowledge Area
605 - Natural Resource and Environmental Economics;

Subject Of Investigation
6040 - Real estate; 6010 - Individuals;

Field Of Science
3010 - Economics;
Goals / Objectives
The primary objective of this proposal is to identify a more accurate system of measuring the value of a home in Lake Tahoe when a recent sale has not been completed. The specific objectives are: (a) To determine the implicit prices of the attributes of a home such as the structural properties of the home as well as the importance of location, i.e. distance to the lake, view to the lake, etc. (b) To use the prices estimated in part (a) to provide a more accurate value of properties in Lake Tahoe. (c) To determine the expected property taxes resulting from the housing prices estimated in part (b). (d) To determine the influence of TRPA enforcement of best management practice policies on future home prices. (e) To measure welfare losses to Lake Tahoe property owners from TRPA environmental regulations. (f) To evaluate the equity implications resulting from the reduced property tax base.
Project Methods
The valuation of the non-marketable attributes of a home is made possible with a hedonic price model. The methodology employs a statistical technique known as a multiple regression analysis to discover the component of value in a housing market. The multiple regression equation allows the analyst to separate out the relationship between property values and the attributes of interest. As a result, it is possible to estimate the willingness to pay for these attributes.

Progress 07/01/05 to 06/30/06

Outputs
The Lake Tahoe housing project has been completed. Market transaction data were collected from Washoe and Douglas counties as well as two counties in California. In addition, we collected data describing the structural properties of each house as well as environmental data that TRPA provided to us. As a result, we determined that several factors influenced the market price of homes in Lake Tahoe. Control variables such as bathrooms, bedrooms, the presence of a fireplace and garage all significantly increased the price of the home. Location variables such as the distance to the beach, ski slope and South Lake Tahoe were important. However, the purpose of this study was to determine the significance of BMP's mandated for homeowners around the area. We found that the priority zone a house was located in significantly impacted the price. In addition, other variables that could determine the likelihood of receiving a certificate also impacted housing prices, such as soil permeability, distance to shore zone, elevation, etc.

Impacts
These results can first be used to accurately value properties around Lake Tahoe. Currently homeowners feel their house is being overvalued and the hedonic pricing mechanism used in this study can correct for this overvaluation if it does indeed exist. In addition, the results suggest that the mandated BMP's while important to maintaining the environmental conditions around the lake are not without cost to property owners. If the current specifications of a home will not allow for a certificate to be administered homeowners will not be able to remodel or build thus decreasing the potential value of their home. Homes that are located in the highest priority zone are currently facing this dilemma.

Publications

  • No publications reported this period


Progress 01/01/05 to 12/31/05

Outputs
Several tasks have been accomplished for this study after the first six months. Although the parcel transactions data set provided by Truckee Meadows Water Authority for Washoe County was not usable, I have taken measures to compile a new data set of housing transactions for the study area. It is expected that clean data will be ready by the middle of February. In the meantime, I have presented work at a conference in Las Vegas very similar to this research and I have also attended a conference where similar methodology has been used to learn new techniques and to receive feedback from my colleagues about the most acceptable approach to approaching this study. I have taken two trips up to Lake Tahoe to better understand the area and the layout of the houses, and what are considered neighborhoods, i.e. areas that share similar environmental characteristics. I had one graduate student assigned to the project unfortunately she has been dismissed from the program. I am currently recruiting a new student from the Economics department. By the end of June, I expect to accomplish the following: 1) To have compiled an extensive database of all housing transactions that have taken place around Lake Tahoe (Nevada only) that would include the structural characteristics, a measure of the lake view, neighborhood characteristics (census data), and environmental characteristics. 2) To have spoken with the Tahoe Regional Planning Authority to ascertain the (new) regulations Lake Tahoe property owners must follow regarding the development around their home. 3) To have estimated a preliminary hedonic model determining the impact of only structural characteristics on the market sales price of the home. 4) To geo-reference the data allowing for a more complete hedonic analysis for the following year. This allows the analyst to measure the impact of proximity to areas (work, non-work, and recreational) on housing prices as well picking up unobserved environmental and neighborhood factors that might affect home prices but are not measurable in the data. 5) To provide these results to the county assessor's office as guidance for the accurate assessment of property values.

Impacts
After the end of the fiscal year, the preliminary hedonic should be completed. The results can be used by the assessor's office to accurately estimate the market prices of houses surrounding Lake Tahoe. It is expected that currently, homes are being overvalued by the county and this should provide a much needed correction.

Publications

  • No publications reported this period