Lake restrictions make lakeshore property more valuable

People are willing to pay more to live on a lake that’s protected from degradation, often related to lakeshore development.

These findings are part of a report from an interdisciplinary team of researchers at UW–Madison, which investigates the ways human beings create and respond to environmental change.

This rise in property value is just one of the preliminary findings presented today, Feb. 14, at the annual meeting of the American Association for the Advancement of Science. Taken together, the initial results point to the importance of understanding the reciprocal interaction between ecological and human systems – something the Wisconsin scientists argue is key to developing effective management strategies.

One of the emerging environmental issues in Wisconsin is the development of the state’s Northwoods region (also known as the Northern Highland Lake District) that’s speckled with thousands of freshwater lakes. A decade ago, before the area’s population grew by 15 percent, anglers on nearly any of the region’s lakes could dip their lines into the water and quickly catch fish. But, as more residents have moved into the area, fish abundance has declined, threatening many qualities of the lakes that attract people to the area.

Development tends to have a homogenizing effect across an area, giving lakes similar water qualities and similar fish and plant communities, says Stephen Carpenter, a UW–Madison limnology professor and one of the project’s leaders.

But, as he and his colleagues note, identifying exactly how humans alter these lakes is only one part of the equation. To understand how lakes change over time and to develop effective management strategies to mitigate predicted changes, researchers must determine how people – particularly fishermen and lakeside residents – may respond to changes in these freshwater ecosystems.

“When most people think about the dynamics of ecological systems, they think only of how humans influence them,” says Tim Kratz, a senior scientist at UW–Madison’s Center for Limnology and the group’s presenter at the AAAS meeting. “But lakes also influence human activities and behaviors. They guide, for example, where people fish or where they decide to build their cabins.”

As Carpenter and UW–Madison economist William Brock learned through mathematical modeling, the collapse of the fish population at one lake can ripple to nearby lakes – anglers, wanting to hook as many fish as possible, are likely to move to another lake that promises more nibbles on the line. Once overexploited, the anglers are likely to move again, until fish populations in all area lakes are depleted, says Carpenter.

But not all human responses to changes in a lake’s ecosystems are negative, according to research by one scientist in the group. In fact, some can lead to a “win-win” situation that protects the lakes while increasing the value of the property surrounding those lakes.

When the quality of lakes begins to break down, lakefront property owners can respond in two ways, says Bill Provencher, an environmental economist at UW–Madison. “They can take action collectively, such as by forming associations that govern lake use, or they can take action privately by moving off the lake.”

In 1999, residents in Vilas County decided to take collective action: they enacted and continue to enforce a lake classification system that customizes development restriction on a lake based on its level of development and sensitivity to environmental change. The regulations, for example, require new lots on ecologically sensitive, undeveloped lakes to be at least 300 feet wide along the lakeshore, compared to the state minimum of 100 feet.

Because the county ordinance is one example of how people have responded to the changes in the environment, the interdisciplinary team of UW–Madison researchers wanted to evaluate the economic and ecological outcomes of these regulatory actions.

Provencher focused on property value, which he says is an indirect marker of the economic value of the ordinance. Property value, he explains, can capture competing positive and negative effects of the ordinance on lakeshore residents, such as the assurance that the lake will be protected from future overdevelopment, but also limitations on how residents can use their property.

The Wisconsin economist says the “win-win” outcome – when the lake classification scheme is both economically and ecologically beneficial – depends on whether the positive economic effect of the ordinance outweighs the negative economic effect.

To determine the overall effect of the classification system on property value, the Wisconsin economist and his collaborators looked at the actual market sales of more than 1,100 lakefront properties sold in Vilas County from 1997 to 2001. For transactions occurring after the zoning restrictions were implemented in 1999, the researchers compared the relationship between selling price and level of development restriction.

The economic effect of the ordinance is generally positive, as reflected in higher property prices, says Provencher, referring to preliminary findings.

The findings show, for example, that the zoning restrictions for Trout Lake – a less developed, 3,816 acre lake in the Northwoods – raises the value of land along the lake from $633 to $715 (about 12.6 percent) per foot of shoreline. Similarly, the price of land around Preque Isle Lake – a smaller and even less developed lake in the region – increased from $410 to $510 per foot (24 percent).

Provencher says the preliminary results suggest that the lakefront homeowners, willing to exchange rights and money to live on a healthier lake, value environmental preservation. At the same time, they also suggest that preservation is valuable economically because it enhances the worth of land surrounding restricted lakes.

This positive connection between the environment and economics could encourage more people to respond collectively to ecological change in northern Wisconsin, notes Provencher: “Economics is the language of public policy. If a policy makes people better off financially, while protecting the environment, it’s an easier sell.”

Whether or not more lakeshore communities will adopt restrictions to protect the value of their lakes and homes, the UW–Madison group says that more research should consider how humans may react to ecological change, as they are players both acting and being acted upon by their environment.

“We want to be able to understand the causes of long-term changes observed in ecological systems, and we want to develop effective mitigation or management strategies,” says Kratz. “We will have little chance of doing this if we don’t understand how humans influence and respond to ecological change.”