EXPLORING THE RELATIONSHIP BETWEEN ARTIFICIAL DUNES AND BEACHFRONT PROPERTY VALUES: INSIGHTS FROM THEORY AND A HEDONIC PRICING MODEL

In the years following Superstorm Sandy, the state of New Jersey implemented large scale berm-dune structures to mitigate future storm-related damages and to maintain its coastal tourism industry. The construction was carried out by the US Army Corps of Engineers following the FEMA “540-Rule” design, which requires periodic renourishment every 7 years on average over a 50-year period. Despite this recent emphasis on artificial dunes as the main coastal protection strategy, it is unclear whether coastal communities can afford them in the long-term. To tackle this question, we developed a “geo-economic” modeling framework that accounts for the natural processes of dune migration, beach erosion, and dune erosion, coupled with renourishment of the beach and dune. Additionally, our framework accounts for the interplay between dune geometry and property values, which could play an important role in future management decisions.

A particular challenge in estimating the benefits generated from dune implementation is a lack of quantitative constraints on stakeholder risk perceptions. Some beachfront communities experience an increase in property values after dune construction, suggesting that they value the protection provided by artificial dunes. Other beachfront communities, however, oppose the construction of artificial dunes due to losses of both ocean views and private access to the beachfront. Assuming plausible values for other model parameters, we solved for the implicit price of dune height as a measure of stakeholder risk perception for three NJ coastal communities. As the implicit price of dune height increases in this framework, beachfront communities are interpreted to give coastal protection more weight relative to the losses of views or access (and vice versa). We found that dune construction increased property values by 0.3% in Long Beach Township, 8% in Ship Bottom, and 14% Beach Haven. We further confirmed these estimates using an empirical hedonic pricing model that controlled for structural and neighborhood characteristics. In the cases of all three NJ coastal communities, stakeholder risk perceptions contributed to their ability to afford artificial dunes in the long-term.