Economic Impact Appraisal of Municipal Solid Waste Dumpsite on Nearby Properties using Hedonic Model

Table of Contents

1.0 Introduction
1.1 Economic perspective of housing demand and population influx

2.0 Functional Form of Regression Model and Empirical Specification of a Study
2.1 Functional form of regression model
2.2 Empirical specification

3.0 Study Area, Data Sample, and Research Design
3.1 Study area
3.1.1 Solid waste generation and disposal system
3.1.2 Municipal solid waste management system
3.2 Data sample and research design
3.2.1 Data sample
3.2.2 Research design

4.0 Discussions of Findings
4.1 Hedonic regression analysis of property off-site effect to waste dumpsite on apartment value

5.0 Summary of Findings

6.0 Conclusion and Recommendations

SHOLADOYE Muniru Oyewale^[1] and TOMORI Abdulfatai Adeyinka^[2]

Abstract

The disposal of municipal solid waste in dumpsites located near to existing properties is a serious problem in developing countries, and littering of MSW is common in the streets that does not have adequate final disposal and responsible for serious negative impacts human health and the environment. This work studies the off-site economic impact of solid waste dump on value of nearby residential properties with particular reference to Offa metropolis, Kwara state, Nigeria. The study hypothesized that solid waste dumpsite has no significant effect (positive or negative) on the values of its proximate properties. The hypothesis is tested with a standard hedonic pricing model using a sample of 450 respondents across the study area. The F- statistics for the model are highly significant at the 1% level, and R2 values are high in the model suggesting that a very high significance could be placed on the results and that the eight housing attributes considered sufficiently account for variation in apartment rentals the study area. Out of the eight explanatory variables used in the analysis, five of them show positive signs of considerable impact on rent apartment price. The findings in this work suggest that waste dumpsites within fully developed residential area should be closed down and relocated. It is further suggested the need to introduce a recycling programmes through modern methods with a view of turning waste to wealth in the study area as it has being practiced in neighboring State of Osun, Nigeria.

Keywords: Hedonic model, Dumpsites, Property value, Regression Model, MSW, Offa

1.0 Introduction

The urbanization and its attendant anthropogenic activities generate humongous municipal solid wastes (residential and commercial).Waste generation in a community and its corresponding clean-up cost tends to increase as the demand for quality of life increases (Chen, Geng & Fujita, 2010). In developing countries, as in Nigeria, most of these wastes end up in municipal dump sites as against engineered or sustainable landfills (Guerrero, Maas, Hogland, 2013). The construction of building structures on abandoned/closed municipal solid waste dumpsites or closer to any active site is becoming a major environmental and public health concern. In fact, proponent literatures reviewed suggested strong positive association exist between human ill health and proximity/exposure to dump or landfill sites (Giusti, 2009; Ayomoh, Oke, Adedeji, Charles-Owaba, 2008). Economic theory implies that “all things being equal”, prospective buyers would specifically avoid purchasing any contaminated or hazard prone land properties; such as waste dumpsites characterized by very low marketability index. Such properties are usually avoided on account of their unattractiveness attached to redevelopment potential, experienced or anticipatory environmental hazard and most importantly, the risk involved for residential building purposes (Olorunfemi, 2011; Zhen-shan, Lei, Xiao-yan, and Yu-mei, 2009).

Any waste repository (dump site or engineered landfill) is characterized by contaminated water called leachate. The toxic water is usually produced by rainfall percolating the surface of deposited solid waste, picking up and/or dissolving soluble (biodegradable) (Karagiannidis, Papageorgiou, Perkoulidis, Sanida, Samaras, 2010) and insoluble (non-degradable) toxic and carcinogenic (Zhang, He & Shao, 2009) materials. Thereafter, the leachate finds its way and contaminates the natural but scarce ground water (Oyeleke, Olumorin, & Kamarudin, 2015; Kim, Endo, Sato, Matsuo, Matsuto, 2009). Aside leachate generation, the presence of biodegradable materials in the municipal dump sites having the potential to release flammable and explosive gases as they decay, further destabilizes and impoverishes geotechnical and foundation engineering properties of the residual organic (matters) soil formed. Researchers have also shown that methane produced at solid waste dump or landfill sites contributes approximately 3-4% to the annual global anthropogenic greenhouse gas (Butu & Mshellia, 2014; Couth & Trois, 2010; Zhang, He & Shao, 2009; Liamsanguan & Gheewala, 2008). Where buildings are cited in the dump site, the likely presence of toxic or chemical contaminants in the waste may as well attack installed building materials or weakens the structural foundation, which interface between the construction and the ground itself (Rai & Mishra, 2016).

The complexity of the technical attention and the huge attendant corresponding cost involved for “hard” forms of developments for example, buildings or structures (Rai & Mishra, 2016) often renders municipal solid waste dump site ground an abandoned land. As such, not attractive to potential property investors. Developers see solid waste dumpsites as organic soil contaminated sites, characterized by low dry density and shear resistance, high permeability and compressibility and high rate of settlement, from the geotechnical engineering standpoint. In addition to that, structures built on peat soil from solid waste are liable to high total or differential settlement, therefore not suitable for infrastructural developments (Butu & Mshelia, 2014). Deleterious chemicals present in the leachate adverse environment may as well attack the concrete foundation, thus weakens the concrete strength and eventually result in corrosion of reinforcement and finally structural failure.

Findings of Butu and Mshelia (2014) indicate that the shoulders of the major streets of towns and cities been used as temporary or permanent dumpsites for daily waste generated. This littering attitude possesses significant aesthetic blight, which is unacceptable. More importantly, the littering attitude is unpleasant from the standpoint of city hygiene, coupled with the high financial costs associated with the cleanups of these places (Al-Khatib, Arafat, Daoud, Shwahneh, 2009; Ayomoh et al., 2008). Also, several open space community facilities such as children playground or adjoin spaces to recreation centres and even water ways/bodies are often been used as temporary or permanent waste dump sites (Dangi, Urynowicz, Belbase, 2013; Giusti, 2009). Furtherance to this and for long, it has been the common practice in the low economy countries (e.g. Nigeria), that abandoned land such as laterite and solid mineral mines, ravines, disused quarries, or excavated pits away from residential areas or business communities etc., were usually considered convenient as waste disposal unit; a strategy of land reclamation with intension of adding to its economic value (Olorunfemi, 2011; Imam, Mohammed, Wilson, Cheeseman, 2008). This strategy is not uncommon when rapid urban development catch up with these abandoned lands (Rai & Mishra, 2016; Olorunfemi, 2011).

1.1 Economic perspective of housing demand and population influx

The search for better living standard in a typical African setting has resulted to massive migration from villages to urban areas, characterized by population explosion (Bello & Bello, 2008). This has increasingly put pressure on housing demands, and therefore, the consideration for property development closer to or directly on abandoned municipal dumpsites. Generally, urbanization has significantly result to living very close to places that are environmentally unattractive, which to date continue gaining upper hand (Dangi et al., 2013). Sometimes, such development is driven by economic opportunity (cheap and/or well-located land), other times by necessity; the only available space or proximity to palace of interest (Bouazza and Kavazanjian Jr. 2001). According to Bello and Ajayi (2010), there is wide range of negative and positive externalities that the environment impacts on market value of property. Genuine sustainable evaluation should take place within a framework that incorporates three dimensions of performance: (1) social, (2) environmental and (3) economic (Kryvobokow & Wilhelmsson, 2007). In this regard, solid waste dumpsites located within residential neighborhoods have drawn the attention of economic Wilhelmsson (2008) and allied (Munoz-Cadena, Arenas-Huertero, Ramon-Gallegos, 2009) researchers to the probable relationship between residential facilities and proximity of solid waste dumpsite.

Numerous studies have been conducted to determine an empirical relationship between residential property prices and proximity to a solid waste dumpsite in many countries, among which include studies on landfills conducted in Baltimore, Maryland by Thayer, Albers, and Rahmatian (1992). Reichert, Small, and Mohanty (1992) also carried out a similar research in Cleveland, Ohio. In Nigeria, Arimah and Adinnu (1995) did their study in Lagos; Adewusi and Onifade (2006) in Surulere, a sub-hub of Lagos; Bello (2007) in Lagos; Udo and Egbenta (2007) in Enugu. Results from these researchers generally support the notion that waste dumpsites have negative effects on property values. On the contrary, a few studies on the other divide (Bouvier & Conway, 2000; Gamble et al., 1982; Wilhelmsson, 2008) have found that no statistically significant relationship exists between house prices and proximity to a landfill site.

The intent of this study is to empirically examine the effects of municipal waste dumpsite on economic value of property proximity. Specifically, this paper utilizes hedonic price indexes to examine the binary effects of building structure and environmental characteristics on the cost of private rental housing in Offa; a large Nigerian urban setup in Kwara state. Results from this paper are of interest to the real estate and landscaping professionals, homeowners, economic and allied researchers and extension specialists advising on property selection and care, to mention but few. Nevertheless, the results of this study, although in line with most expectations, should be taken with caution because of several limitations. First, the hedonic pricing method only provides accurate estimations of the value of environmental quality if perfect information exists in the market (i.e. all buyers in the housing market have perfect information on the environmental quality variables at every conceivable location).

This assumption is however not met, as in reality people’s awareness of the dumpsite most often is based on inaccurate and/or scanty information or complete lack of knowledge (Afon, 2007). For instance, if a dumpsite poses a serious health risk, individuals may not be aware of either its extent or its potential impact on house values. Second, the assumption regarding zero transaction costs is also not borne out in reality (Afon, 2007). Many individuals who reside in close proximity to a dumpsite maybe disturbed by the potential health risks it poses, but relocation costs may be prohibitively expensive. This often outweighs the incremental benefits derived from being situated further away from the dumpsite.

2.0 Functional Form of Regression Model and Empirical Specification of a Study

2.1 Functional form of regression model

Since the development of the hedonic pricing method, there has been much debate on the choice of a proper functional form of the regression model (Bello, 2008; Du Preez & Lottering, 2009; Kryvobokow & Wilhelmsson, 2007; Oduwole & Eze, 2013). In fact, to date, there is no guidance in economic theory that would support the “best” possible functional form or robust criteria for deciding the optimal model form. Instead, researchers are left to base their choice on (1) the rational goodness-of-fit measures and (2) the signs and significance of estimated coefficients. In their study of Hong Kong housing market, McCluskey and Rausser (2003) emphasized model form parameters as the date of sale, age of property, size, number of bedroom and bathrooms. Also included are number of garages, type of central heating, condition, neighborhood and group cluster. In a similar Hong Kong study, classified residential property attributes into four categories namely: (1) structural, (2) physical, (3) neighborhood and (4) environmental (Love, 2000 in Wokekoro & Uruesheyi, 2014).

In a Nigerian study, Bello (2008), grouped the attributes of model form into those that are internal as well as are external to the property. Internal attributes is said to comprise the intrinsic characteristics of the property such as size, number of accommodation, condition, aesthetics, layout, age, and plot size, while external attributes include the general state of the economy, population, employment, immigration, finance, location, infrastructure, transportation and neighborhood characteristics. Years back, Megbolugbe (1989) researched into the housing market in Jos, Nigeria. Interestingly, the researcher classified housing into three categories or traits: (1) structural (square meters, building age, roof cover, and plumbing fixtures); (2) neighborhood (school quality, road quality, and availability of electricity, water and other vital public services); and (3) locational (access to economic, social, and political activities such as distance to central business district (CBD), shopping centers, parks, and other recreational facilities). What can be drawn from the aforementioned studies is that the housing attributes employed in a particular study would be those related and of relevance to the specific real estate market under consideration; thus, reflecting the factors which significantly influence the expectations and perceptions of participants in that particular market.

2.2 Empirical specification

The dependent variable chosen for this work was the selling price of the home. Selling price was determined to be a suitable dependent variable because it represented the value of the home when it was sold; the price was determined by the market conditions. Another reason is that the effects of the variables (internal and external attributes) used in the model would be easily interpreted in terms of the house selling price. The selling price of a home being used as the dependent variable is also commonly applied in most literatures involving hedonic property value analysis (Babawale, 2010; Friso & Henri, 2009; Komarova, 2009). Following Boardman et al., (2001), the hedonic price function (hpf) can be expressed as:

The price of a house (P) can be seen as a function of its location (LOC, an external attribute) such as the access road; type of the house (TYPE, an internal attribute); size of the house (SIZE, an internal attribute) such as the number of rooms, bathroom cum toilets, the parking lots and ancillary facilities; the quality of its view (VIEW, an internal attribute) such as property condition; and the neighborhood characteristics (NEIGH, an external attribute), such as school quality and security. The change in a house price resulting from the marginal value change in one of these characteristics or dependent variables is called the hedonic price (sometimes referred to as the implicit price or rent differential).

A variety of forms of the hedonic regression equations have been employed in the various real property related studies (Bello, 2008; McCluskey and Rausser, 2003).The linear model proves the simplest, and commonly used in the past (Bello, 2008). The linear hedonic regression model assumes that each property characteristic (variable) adds to the overall value in a simple aggregation fashion or superposition. For example, the first bedroom adds the same value as the fifth bedroom. For the purposes of this study the following hedonic price function, proposed by Boardman et al., (2001) was specified:

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^[1] Chief Lecturer, Department of Civil Engineering, Kaduna Polytechnic, Kaduna, Kaduna State, Nigeria

^[2] Planning, Research and Statistics Department, Kwara State Ministry of Education and Human Capital Development, Ilorin, Kwara State, Nigeria