Do Green Buses Make Property Prices Rise? A Regression Discontinuity Approach

Abstract: Residents in Stockholm had called for an improved physical environment regarding noise reduction as well as better air quality and in August 2014, a fleet of environment-friendly city buses was introduced on a limited number of bus lines in downtown Stockholm. This paper means to examine a possible value created and shown in rising prices of property in the vicinity to the new buses. The study also aims to highlight and quantify the corporate social responsibility, CSR, efforts made by the City of Stockholm as well as those made by the public transportation sector. By using a highly explanatory hedonic pricing model, the authors control for the characteristics valued when people purchase a home. In addition, the remaining variance in the residuals is analyzed using a regression discontinuity (RD) design. In the global RD approach, a rise in property prices by approximately 6% is found. However, the local RD method does not support this, indicating little evidence of increased property value as a result of closeness to environment-friendly buses. It seems that despite the importance of a healthy environment, other factors than the fuel used in the nearby buses, set prices for inner-city apartments in Stockholm.