Abandoned Industrial Areas with Critical Environmental Pollution: Evaluation Model and Stigma Effect

Abstract

The paper illustrates the phases and results of an evaluation model applied to abandoned industrial areas affected by critical environmental pollution. The main aim is to provide the economic evaluation of the impacts of critical environmental pollution on the market value of the areas, in anticipation of their future requalification and refunctionalization. Firstly, two mass appraisal models are applied: a regressive model in order to isolate the effects of real estate valorization generated by the requalification interventions of the abandoned steel mill areas of Bagnoli in Naples (Italy); an autoregressive model in relation to the chronology of the interventions and the real estate market dynamics, in order to predict values and costs of the building products to be realized on the areas. Subsequently, using the Ellwood model, the irreversible damage suffered by the areas in question due to the effect of critical environmental pollution is estimated. This irreversible damage corresponds to a “stigma” effect, or a loss to property value due to the presence of a risk perception-driven market resistance: for the abandoned steel mill areas of Bagnoli the reduction in the market value is equal to 28.63% approximately. The state of contamination of the areas is also described, estimating the related environmental remediation costs as a “deduction” to be applied to the “capital value” of the areas.