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Does Water Quality Affect Lakeshore Property Values?
How is the value of a lake lot decided? Are there qualities of the lake water that make one parcel of land more desirable than another? If the lake is clean and clear are the values of the adjoining properties increased?
In the summer of 2002, the Mississippi Headwaters Board tried to answer these questions. They commissioned a study to conduct research that would determine if water quality of Minnesota lakes affects lakeshore property values. Similar studies had been conducted in Maine. These studies showed that water clarity, a measure of water quality, did have a significant affect on lakeshore property prices, around Maine lakes. Is this same fact true in Minnesota?
How was the study done?
Researchers at Bemidji State University were hired to conduct the study. In the Mississippi Headwaters area, 37 lakes were selected. Lakes were chosen to represent a diversity of size, spatial and political representation in the region. The lakes also had monitoring data available from the MPCA.
The study began by investigating lakeshore property sales between 1996 and 2001. A total of 1205 sales were used. Properties were site visited and rated for lakeshore environmental quality features and an average rating was computed for each lake. This data was used in models devised to estimate the value of water quality expressed in the sales. The value of an environmental amenity, such as the quality of lake water, is exhibited in the value of the land and not in the value of structures and other improvements.
What was learned through the study?
The major finding of the analysis was that lake water clarity was a significant variable of lakeshore property prices, in all lake groups and in both models used. Property prices paid were higher on lakes with higher water clarity. In other words, buyers of lakeshore properties prefer, and will pay more for properties on lakes with better water quality.
What does this mean for us?
Sustaining and improving lake water quality will protect and improve lakeshore property values. Investments by owners of Minnesota’s riparian properties are linked to ecologically healthy lakes. A share of each lakeshore property’s price is attributed to water quality.
The evidence shows that management of the quality of lakes is important to maintaining the natural and economic assets of the region.
What next?
In summary, lake water quality is important for Minnesota’s ecological, cultural, and economic sustainability. Lakeshore property owners and policy makers should regard enhanced property values as an important enough reason to protect water quality. Our lakes must be wisely managed if they are t be sustained. The results of reduced water quality is a reduction of aesthetic values, decreased recreation benefits, and a lowering of property values. For economic reasons alone – not to mention the numerous other benefits at stake – it is important to work together to protect the water quality of all Minnesota’s lakes.
Where can I learn more?
Information shared here was taken from “Lakeshore Property Values and Water Quality. Evidence from property sales in the Mississippi Headwaters Region.” . This document can be viewed on the Mississippi Headwaters Board website -www.mississippiheadwaters.org
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