How and why does green infrastructure add value to real-estate?
“Green Infrastructure can be defined as strategically planned and managed networks of natural lands, landscapes and other open spaces that conserve ecosystem values and functions and provide associated benefits to human populations. Additional elements and functions of green infrastructure are working lands, trails and other recreational features (Amundsen et al. 2009).5“
Green infrastructure adds values to real estate by providing all of the ecosystem services that are directly correlated to anthropogenic physical, psychological, and social health benefits. Some of these benefits include but are not limited to “food sources, biomass…decomposition, water filtration, climate regulation…aesthetic value, outdoor recreation…(CICES 2015).1 ” A key social benefit of green infrastructure is how shared it usually is with the public this is usually referred to as Nonexcludability. Which means “the people cannot be excluded from using a park or cycle track and they do (to a certain degree) not compete in consuming it.(Karsten Rusche et al 2014) 7” These social benefits improve economic capital around the surrounding area because of the people it draws in. As consumers are more aware developers of real-estate are acknowledging these ecosystem services and implementing them more in new projects and designs. Green infrastructure has been used in recent years as compared to grey infrastructure because “Green Infrastructure in urban water engineering have gained attention due to their lower lifecycle costs—in both implementation and operation phases—rather than traditional gray approaches.(Tavakol-Davani, HASSAN, et al. 2016 )3“
A Way of Analyzing Green Infrastructure:
Cost benefit analysis is one that is used in conservation ecology as well as business. Many conservation-biologist as well as many economist are not aware that these models can cross multiple disciplines representing the same decision making process between these different fields. In the world of business a cost benefit analysis is defined as “the exercise of evaluating an action’s consequences whereby the pluses are weighted against the minuses. It is a fundamental assessment behind virtually every business decision, and stems from the simple fact that business managers are generally rational decision makers, and the net economic outcome of a decision is a critical element to be considered(Kaliski, Burton S, et al. 2007).2” “definition of cost benefit analysis from an ecological perspective…(..)..” A cost benefit analysis could be used to assess green infrastructure from a conservation biologist perspective as well as a economic business decision. Another way of analyzing green infrastructure’s influence on real-estate value is by the hedonic pricing method. The “hedonic pricing methods refer to housing markets and non-structural influences that are driving factors of housing prices (Can 1992).4” The major drawback of these methods is that they can measure the use values of environmental goods, but non-use values cannot be captured (Adamowicz et al.1994)6.
A Look at Real Life Examples
With many physical, psychological, and social health benefits associated with green infrastructure there isn’t a lot of reasoning to veto/disapprove. In a study in Germany, people were randomly interviewed about green infrastructure and their willingness to pay for it. “Within the 972 respondents answering this question, 38.2% stated that they would be willing to pay , which means that the larger share of interviewees supporting any kinds of future projects, were not willing to contribute financially… The main reason why respondents were not willing to pay was that they perceived that they already paid enough taxes and that projects of this kind should thus be financed from public resources Other interviewees who refuse financial contribution argued that their income was too low, or that they would prefer other kinds of investments(Karsten Rusche et al 2014)”7. “Commission for Architecture and the Built Environment in London states that the price of buildings or houses will increase by 6% if there is a park nearby, and by 8% if the building has a direct view of the park. Green roofs, especially if spread over a larger area, has a similar function as a local park…The extensive green roof may raise property value from $2.6 to $8.3 million, while intensive green roofs may increase property value from $8.3 to $43.2 million.(Feng, Haibo al et. 2018)8”
To conclude this overview on looking at the capital gain to real-estate when green infrastructure is added. There are a lot of factors that gives us reasons why we should want green infrastructure added to our ever-developing world many are for preserving the natural biodiversity on this planet. With the anthropogenic views our society unfortunately many ecosystem services are only looked if they are in the welfare of humans. Fortunately green infrastructure that is well designed benefits flora and fauna as well as humans. With the acknowledgment of physical, psychological, and social health benefits as well as more demand hopefully this technology will be implemented more.
Adamowicz, W., Louviere, L., and Williams, M., 1994. Combining revealed and stated preference methods for valuing environmental amenities. Journal of Environment und Management, 26 (3), 271 –292.
Amundsen, O.M., Allen, W., and Hoellen, K., 2009. Green infrastructure planning: planning: recent advances and applications [online]. American Planning Association. Available from: www.conservationfund.org/sites/default/files/Green_Infrastructure_Planning_The_Conservation_ Fund.pdf [Accessed 5 October 2012].
Can, A., 1992. Specification and estimation of hedonic housing price models. Regional Science and Urban Economics, 22 (3, September), 453 –474. Available from: http://dx.doi.org/10.1016/0166- 0462(92)90039-4.
Common International Classification of Ecosystem Services (CICES). Structure of CICES; European Environment Agency: Copenhagen, Denmark, 2015; Available online: http://cices.eu (accessed on 3 February 2016).
Feng, Haibo, and Kasun N. Hewage. “Economic Benefits and Costs of Green Roofs.” Nature Based Strategies for Urban and Building Sustainability, Feb. 2018, pp. 307–318., doi:10.1016/B978-0-12-812150-4.00028-8.
Kaliski, Burton S, et al. Encyclopedia of Business and Finance. 2nd ed., Macmillan Reference USA, 2007.
Tavakol-Davani, HASSAN, et al. “Performance and Cost-Based Comparison of Green and Gray Infrastructure to Control Combined Sewer Overflows.” Journal of Sustainable Water in the Built Environment, 2 , no. 2, May 2016, ascelibrary.org/doi/abs/10.1061/JSWBAY.0000805.
Wilker, Jost, and Karsten Rusche. “Economic Valuation As a Tool to Support Decision-Making in Strategic Green Infrastructure Planning.” Local Environment, vol. 19, no. 6, 2014, pp. 702–713., doi:10.1080/13549839.2013.855181.