One of the hallmarks of great urban spaces is walkability–places with lots of destinations and points of interest in close proximity to one another, buzzing sidewalks, people to watch, interesting public spaces–all these are things that theexperts and market surveys are telling us people want to have.
Its all well and good to acknowledge walkability in the abstract, but to tough-minded economists (and to those with an interest in public policy) we really want to know, what’s it worth? How much, in dollar and cents terms, do people value walkable neighborhoods? Thanks to the researcher’s at RedFin, we have a new set of estimates of the economic value of walkability.
Redfin used an economic tool called “hedonic regression” to examine more than a million home sales in major markets around the country, and to tease out the separate contributions of a house’s lot size, age, number of bedrooms and bathrooms, square footage and neighborhood characteristics (like average income). In addition, the RedFin model included an examination of each property’s Walk Score. Walk Score is an algorithm that estimates the walkability of every address in the United States on a scale of 0 to 100 based on its proximity to a number common destinations like schools, stores, coffee shops, parks and restaurants.
What they found is that increased walkability was associated with higher home values across the country. On average, they found that a one point increase in a house’s Walk Score was associated with a $3,000 increase in the house’s market value. But their findings have some importance nuances.
First, the value of walkability varies from city to city. Its much more valuable in larger, denser cities, on average than it is in smaller ones. A one point increase in Walk Score is worth nearly $4,000 in San Francisco, Washington and Los Angeles, but only $100 to $200 in Orange County or Phoenix.
Second, the relationship between walkability and home value isn’t linear: a one point increase in the Walk Score for a home with a very low score doesn’t have nearly as much impact as an increase in Walk Score for a home with a high Walk Score. This suggests that there is a kind of minimum threshold of walkability. For homes with Walk Scores of less than 40, small changes in walkability don’t seem to have much effect on home values. In their book, Zillow Talk, Spencer Raskoff and Stan Humphries reached a similar conclusion in their research by a somewhat different statistical route, finding that the big gains in home value were associated with changes toward the high end of the Walk Score scale.
For their benchmark comparison of different cities, RedFin computed how much a home’s value might be expected to increase if it went from a WalkScore of 60 (somewhat walkable) to a WalkScore of 80 (very walkable). The results are shown here.
Among the markets they studied, the average impact of raising a typical home’s Walk Score from 60 to 80 was to add more than $100,000 to its market value. In San Francisco, the gain is $188,000; in Phoenix, only a tenth that amount.
Redfin’s estimates parallel those reported by their real estate data rivals at Zillow. Raskoff and Humphries looked at a different set of cities, and examined the effect of a 15-point increase in Walk Score. They found that this increased home values by an average of 12 percent, with actual increases ranging from 4 percent to 24 percent.
We think the new RedFin results have one important caveat. We know from a wide variety of research that proximity to the urban core tends to be positively associated with home values in most markets. And it turns out that there is some correlation between Walk Scores and centrality (older, closer-in and more dense neighborhoods tend, on average to have higher Walk Scores). RedFin’s model didn’t adjust its findings for distance to the central business district. What this means is that some of the effect that their model attributes to Walk Score may be capturing the value of proximity to the city center, rather than just walkability. So as you read these results, you might want to think about them representing the combined effect of central, walkable neighborhoods. (Our own estimates, which controlled for centrality, still showed a significant, positive impact for walkability on home values).
The RedFin study adds to a growing body of economic evidence that strongly supports the intuition of urbanists and the consumer research: American’s attach a large and apparently growing value to the ability to live in walkable neighborhoods. The high price that we now have to pay to get walkable places ought to be a strong public policy signal that we should be looking for ways to build more such neighborhoods. Too often, as we’ve noted, our current public policies–like zoning–effectively make it illegal to build the kind of dense, interesting, mixed-use neighborhoods that offer the walkability that is in such high demand.