The value of cleaner waterways: Evidence from the Black-and-Odorous water program

This study investigates the economic impacts of cleaning up heavily polluted waterways in urban neighborhoods. We leverage the Black-and-Odorous water program, a major urban environmental campaign in China, as a natural experiment to identify the causal impact of cleaner waterways on local housing prices, housing supply, and business growth. Implemented in 2016, the program remediated heavily polluted waterways in China’s 36 most developed cities. Using a difference-in-differences estimator, we find that the program mainly benefits properties within 1 mile of cleaned-up waterways: These properties saw a 2.3 % appreciation in market value after the program. Beyond the impacts on the housing market, we identify two novel mechanisms associated with community revitalization following pollution management and examine their implications for housing prices. First, new real estate developments near treated waterways are more likely to offer high-end units after the program. Second, service businesses flourish in neighborhoods near cleaned waterways, indicating a commercial rejuvenation of these areas.