The Economic Impacts of Carolina Beach Inlet Navigability on Waterfront Property Values
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Abstract: One amenity associated with coastal estuarine/waterway waterfront property is the ability to access the ocean by boat through inlets that connect inland waterways with the ocean. All else equal, one would expect faster ocean access to be associated with higher property values. If shoaling blocks an inlet, owners must travel farther to reach the next-nearest inlet, slowing access to the ocean, with possibly negative effects on waterfront property values. The purpose of this study is to assess the potential impact of the complete loss of Carolina Beach Inlet (CBI) navigability on estuarine/waterway waterfront (oceanfront properties excluded) residential property values in New Hanover County, North Carolina. For the set of properties for which CBI is the nearest inlet, the average distance to CBI is 2.15 miles, while the average distance to the next-nearest inlet is 9.24 miles. The difference in distance is twice as far as the difference in distance for the average estuarine/waterway waterfront parcel in New Hanover County. Multiple regression analysis is used to estimate the effect of inlet distance on estuarine/waterway waterfront parcel values while controlling for other factors that can affect parcel values, including parcel acreage, structure square footage, distance to the oceanfront, "neighborhood" effects, and annual effects. The analysis finds that inlet distance has a negative and highly statistically significant effect on single-family parcel values (see Figure 4). The result for single-family parcels is robust to several alternative model specifications. As expected, the effect is nonlinear, being stronger when a parcel is closer to an inlet and weaker when a parcel is farther from an inlet. Results are somewhat mixed for condominium/townhouse parcels, but on balance, inlet distance appears to have a negative effect on condominium/townhouse parcel values; however, the degree of statistical confidence in this result is lower, compared to results for single-family parcels. New Hanover County has 4,485 estuarine/waterway waterfront residential parcels with an assessed value of $3.34 billion (year 2016 dollars). CBI is the nearest inlet for 1,359 of these parcels with an assessed value of $561 million, and of these, 890 parcels with an assessed value of $278 million are located within the Town of Carolina Beach proper. If CBI were to become unnavigable and the next-nearest inlet (i.e., Masonboro Inlet) became the nearest inlet, the typical (median) parcel would lose an estimated $45,069 in value (16.6 percent), with an estimated aggregate loss of $84.7 million in assessed value for all parcels for which CBI is the nearest inlet. Of this, parcels located in the Town of Carolina Beach itself would lose an estimated $42.7 million in aggregate assessed value. The property tax rate for New Hanover County is 0.5700 per $100 of assessed value. For the parcels for which CBI is the nearest inlet, the $84.7 million in lost value equates to a reduction in county property tax revenues of $482,818 per year.
