Housing market capitalization of environmental risk: evidence from the Tianjin explosion

Do environmental risks affect housing prices in the vicinity of industrial plants? Prior studies concentrated on the capitalization effect of infrequent natural disasters instead of industry-related environmental risks caused by production accidents in our everyday lives. In this paper, we first use the 2015 Tianjin explosion in China as an exogenous shock, which led to serious casualties and property damage with nationwide concern, to estimate the effects of environmental risk on housing prices far away from the explosion site. Based on the housing transaction units and chemical plant datasets in Beijing with the difference-in-differences hedonic model, the results indicate that first, housing prices near chemical plants decreased significantly after the explosion and lasted for at least 2 years. Second, the mitigation effects of production and consumption amenities and regional demographic features were examined. The conclusions of this paper provide a policy basis for constantly implementing public sentiment management and safety supervision, balancing industrial and residential land layouts, and improving local amenities and demographics to ensure the stability of the land market.