Can Fairness Flow in Philly?

Climate change has led to the need for developing additional stormwater infrastructure that can mitigate runoff into traditional storm drains while offering alternatives to concrete and metal (“gray”) drainage systems. We explore how Green Stormwater Infrastructure (GSI) in the City of Philadelphia, Pennsylvania impacts housing prices, how it can be financed, and whether the approaches proposed and those currently used are consistent with fair and equitable practices. We rely on a comprehensive data set of residential housing prices and assessed values, together with a detailed set of geographic information systems (GIS) data on the locations, types, and installation dates of GSI throughout the city. We develop an innovative identification strategy that uses difference-in-differences regression methods. With this approach, we determine that the causal impacts of GSI on single family residential sales prices per square foot of living area are in the range of 10 to 15 percent, on average. This range of estimates is consistent across a broad range of alternative robustness checks. We also compare two alternative stormwater financing mechanisms with the current Philadelphia Water Department user-fee of a flat charge based on the average residential property size and average impervious area in the city. Specifically, for a fee structure dependent on a traditional property tax, as well as separately a fee based on the amount of impervious area on each property, we compare the share of property value paid for the stormwater charge against the overall property value to determine whether the alternative financing mechanism would be neutral. Indeed, we find that both alternative approaches are also regressive. The impervious area charge is more regressive than the property tax approach but less regressive than the flat fee because more expensive homes tend to have less impervious area. These findings may motivate offering greater incentives or subsidies for owners of lower-valued homes to purchase and install GSI.