The Price of Silence

Abstract

This paper studies the causal impact of street noise on housing prices. It focuses on a very dense urban environment and its entire soundscape, using granular data on listed flats and street noise. We employ a combination of hedonic price and fixed effects model, exploiting the regular grid shape of the Eixample district, in Barcelona. Our results indicate that doubling the perceived street noise generates an average depreciation of 3.4% on sales and 2% on rents. We show that the lower semi-elasticity with which the rental market adjusts for the negative externality is associated with a higher turnover of tenants in louder streets. Moreover, we collect several pieces of evidence which suggest that the effect is not driven by sorting by neighbors. Lastly, we use our results to perform two costbenefit analyses of policies which help reducing noise. Based on our findings, we formulate policy recommendations and highlight specific interventions that can mitigate the negative impact of urban noise.