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JOURNAL OF ENVIRONMENTAL ECONOMICS AND MANAGEMENT 12,169-178 (1985)
Housing Values, Census Estimates, Disequilibrium, and
the Environmental Cost of Airport Noise: A Case Study
PATRICIA HABUDA O’BYRNE
IBM, Inc., Hurrisburg, Pennsylvania 17101
JON P. NELSON
Department of Economics, Pennsylvania State University, University Park, Pennsylvania 16802
JOSEPH J. SENECA
Department of Economics, Rutgers University, New Brunswick, New Jersey 08903
Received May 13,1983; revised April 1984
Two unresolved issues about airport noise-property value studies are addressed. The first
issue concerns the comparability of empirical results from aggregate census data vs individual
sales values, and the second issue concerns the homogeneity and stability of results from
housing price studies over time and across markets. Hedonic price models from two sets of data
for a residential area near the Atlanta International Airport are estimated at two points in time,
1979-1980 and 1970-1972. The available data yield similar estimates of the noise discount over
time, and from the prices of individual house sales vs owner-appraised census block aggregates.
‘r, 1985 Academic Press. Inc.
In the past decade a number of studies have examined the relationship between
airport noise and residential property values. Typically, these investigations rely on
owner-appraised property values, aggregated and averaged for census tracts or
blocks for the census years 1960 or 1970.* Two significant empirical questions arise
about the validity of the results obtained in these studies. The first is concerned with
the accuracy of property value data; namely, do owner-response errors in the census
data or assessment errors in house appraisal data lead to different noise-discount
estimates compared to studies using actual market sales values (transactions prices)?
Lave [14, p. 2361, for example, argues that appraisal values are bad surrogates for
market prices and also that census aggregates lead to additional measurement
i We are grateful to Ivy Broder, James Follain, Marvin Frankel, Allen Goodman, and two anonymous
referees for helpful comments on earlier drafts. The usual disclaimers apply. Correspondence should be
addressed to Dr. Nelson, 518 Kern Graduate Building, Pennsylvania State University, University Park,
‘Nelson  surveyed the results from nine studies of U.S. airports. Four studies employed census
tract data, three used census block data, and two used sales data for individual properties. Of the latter
studies, only one, , used an explicit measure of aircraft noise exposure.
Copyright 6 1985 by Academic Press, Inc.
Au rights of rqxoduction in any form reserved
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170 O’BYRNE, NELSON, AND SENECA
difficulties for locational factors, quality of housing, and the like. On the first of
Lave’s arguments there is some contrary evidence available for U.S. housing markets
[lo, 17, 231. With regard to his more fundamental point, we are not aware of studies
that directly compare empirical results from aggregate census data vs individual sales
A second important empirical question of the noise-proprety value studies is
whether the estimates from 1960 or 1970 apply in the economic environment of the
1980s. Skepticism about the homogeneity and stability of results from housing price
studies over time and across markets has been voiced by several observers [13, 16,
21].4 Along similar lines, housing price studies have been criticized for failing to
account for homeowner expectations about the probable future level and distribu- tion of environmental factors (e.g., [l]). On the issue of market segmentation, there is
some contrary evidence available for U.S. housing markets [4, 17, 19, 251. However,
to the best of our knowledge, there are no studies that compare the effect of noise at
a given airport at two points in time, in order to provide some evidence on the issue
of housing market disequilibrium for the 1970~.~
This paper takes a first step toward addressing both of these unresolved issues. We
estimate hedonic price models from two sets of data for a residential area near the
Atlanta International Airport at two points in time, 1979-1980 and 1970-1972. The
data sets include both individual property sales and census block data. Section 1 of
the paper provides a brief background into the study area and a discussion of
homeowner expectations. Section 2 presents the results from data on individual
property sales in 1979-1980, while Section 3 repeats the analysis using 1970
aggregate census block data. Section 4 discusses the two sets of empirical results and
comments on earlier studies.
Although the analysis is limited to one airport and the data are not completely
comparable for both time periods, we conclude that the available data yield similar
estimates of the noise discount over time, and from the prices of individual house
sales vs owner-appraised census block aggregates. Our estimates are also similar to
the mean values obtained in earlier studies. Accordingly, biases in the noise-discount
estimate due to aggregation or disequilibrium are not obvious, contrary to the
general criticisms of housing price studies present in the several works cited above.
William B. Hartsfield Atlanta International Airport (hereafter the Atlanta Air- port) is the second busiest in the world, serving over 40 million total passengers in
1980. Opened in 1929, the Atlanta Airport experienced substantial growth in the
30ne study, Goodman , does compare census block with census tract data. See also Butler  for a
discussion of the magnitude of specification bias in hedonic price studies of housing markets. However,
no studies exist comparing census data results to those of market sales for a given area.
4For example, Maclennan [16, p. 631 argues that “housing markets.. could be expected to have
different characteristics, all of them tending to generate compartmentalization of the market and the
likelihood of disequilibrium.”
‘Pa&  and DeVany  examine Dallas’ Love Field Airport for 1960 and 1970, respectively, using
census block data. Paik’s results are discussed in our conclusions in Section 4.
6 The discussion in this section is based on Chapter I of the environmental assessment report for the
proposed runway development project at the Atlanta Airport . This report was prepared by the Atlanta
Airport engineers and became a federal document on September 10,1982.
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HOUSING VALUES AND AIRPORT NOISE 171
1950s and 1960s. To accommodate this growth, a modern jet terminal was opened in
1961 and two 8000-foot parallel east-west runways were completed in 1964.
Following the development of an Airport Master Plan in 1968, construction was
begun on an additional runway in order to accommodate anticipated traffic growth
in the 1970s. The existing runway system now consists of three parallel east-west
runways of which runway 8-26, reconstructed in 1969, is the longest with a length of
10,000 feet. Runway 9L-27R was reconstructed in 1974 and is 8000 feet long. The
newest runway, 9R-27L, is 9000 feet in length and was opened for operation in early
1973.’ In September of 1980, a large, new terminal complex was also completed.
Between 1970 and 1980, domestic and international commercial air carrier oper- ations at the Atlanta Airport increased by 45% from about 374 thousand to 544
thousand air carrier operations per year. On an average day in 1980 over 1490 air
carrier operations took place compared to 1025 in 1970. The picture that emerges is
thus one of substantial commercial air traffic growth, accompanied by related
runway, terminal, and other construction activity. The anticipation of further growth
in the 1980s was allowed for in the 1968 Master Plan, with an ultimate annual
capacity of 705 thousand total aircraft operations per year. Indeed, in September of
1979, the City of Atlanta notified the Federal Aviation Administration of its
intentions to construct a new 9000-foot runway parallel to and north of existing
runway 8-26, and to extend existing runway 9L-27R to 11,900 feet in length.8 In
sum, the Atlanta Airport is a major facility, with the attendant economic and
environmental problems that accompany size and growth.
In the housing market near an airport, homeowner expectations about growth and
change can be expected to play an important role in determining asset values. In the
absence of a formal model of homeowner expectations, we cannot discount entirely
the possibility that our empirical results might be subject to some biases due to
anticipated future change. We do, however, wish to call attention to the following
facts about Atlanta Airport: (1) a Master Plan was in place by 1968 and as far as
can be determined this Plan accurately anticipated the growth that occurred between
the mid-1960s and 1980;9 (2) growth at the Atlanta Airport was not abrupt or
discontinuous during this period, instead air traffic grew steadily by 4 to 5% per
annum and additional facilities were being constructed or modernized every 4 to 5
years; and (3) continued growth is expected in the 1980s as the final stage of the
Master Plan is completed. This stage includes the fourth runway, plus proposed
additions to the terminal concourses and hangars, highway and transit facilities, and
reuse of the old terminal building.
In the analysis of a single cross section of data, the investigator assumes as a
maintained hypothesis that different households are homogeneous, except for dif- ferences in the measurable variables of the problem and a random error term. To the
extent that households have homogeneous expectations about future environmental
‘The southernmost runway (9R-27L) is used primarily for arrivals. The middle runway (9L-27R) is
used primarily for departures, while runway 8-26 is used for both arrivals and departures [9, p. I-71.
‘The Aviation Safety and Noise Abatement Act of 1979 (P.L. 96-193) requires that, when airport
development is to be undertaken, the airport operator must submit a noise exposure map and a noise
compatibility program to the Secretary of Transportation. For discussion of this law and other recent
policy developments, see  and .
‘The 1968 Master Plan estimated that the Atlanta Airport would be boarding over 20 million
passengers by 1980. The actual number of enplaned passengers in 1980 was 20.02 million [9, pp. I-6 and