The Value of Cleaner Waterways: Evidence from the Black-and-Smelly Water Program in China

This paper investigates the economic impacts of cleaning up heavily polluted waterways in urban neighborhoods. We exploit the Black-and-Smelly Water Program in China as a natural experiment to identify the causal impact of cleaner waterways on local housing prices, housing supply, and business growth. First implemented in 2016, the program remediated heavily polluted waterways in China’s most developed cities. Using a Difference-in-Difference estimator, we find that the program mainly benefits properties within 1 mile of the cleaned-up waterways: these properties were 3.7% cheaper before the program and experienced a 2.3% market value appreciation after the program. We also show that developers building new apartment complexes near BSW sites are more likely to provide high-end units with luxury decoration and spacious layouts. In addition, we observe various service businesses thriving in the neighborhoods close to the cleaned-up waterways, indicating a revitalization of these areas. Our findings shed light on the effects of environmental programs in real estate markets and neighborhood dynamics.