Working Paper
Air Pollution and Rent Prices: Evidence from Wildfire Smoke Plumes
Abstract: We leverage quasi-experimental wildfire smoke shocks to analyze the causal effect of air pollution (PM2.5) on rent prices, using satellite-based smoke plumes data and ambient air pollution data. Our results indicate that the rent of homes that are not directly affected by wildfires but exposed to wildfire plumes declines by about -2.4% per one standard deviation increase in PM2.5. The response of home prices is more than threefold highlighting a gap in the tolerance of poor air quality, which we find is driven by age-related differences between tenants and homeowners. We further show evidence that air pollution affects liquidity and search frictions in the rental market.
Keywords: Air Pollution; rental housing; house prices; wildfires;
JEL Classification: Q52; Q53; R21;
https://doi.org/10.24149/wp2502
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Provider: Federal Reserve Bank of Dallas
Part of Series: Working Papers
Publication Date: 2025-01-08
Number: 2502