Social value of infrastructure: Seven case studies – Part 2
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08 September 2020
Case study 4: Discrete Choice Experiment – Housing Infrastructure
Background
With rising concern for the environment and buildings accounting for an increasing percentage of energy usage and waste, there is a growing demand to ensure that buildings are managed and designed in a responsible or ‘green’ way. With a wide range of different methods available to make a building greener, there is a need to assess each method’s value in order choose those that optimise social benefit through housing infrastructure. To do so, Chau, Tse and Chung (2010) conducted a study to value the different sustainability measures residential buildings in Hong Kong may take to reduce their environmental impact and increase social value.
Method
The study employed a discrete choice experiment to elicit monetary values for five different categories of green measures (see Results table). Respondents from two districts in Hong Kong completed a face-to-face survey generating 480 responses. Respondents were presented with an introductory section assessing their awareness and understanding of green residential developments. This was followed by the valuation scenario in which they were asked to make eight choices based on their most preferred building option (a neither option was also available).
Results
Based on the respondents’ choices, willingness to pay (WTP) values (in HK$) were calculated for each of the green measures. The results are presented below for different income groups. This study contributed to an ongoing process of enabling the evaluation of building developments’ benefit to society in order to ensure developments are designed to maximise their social value.
| Group | Reduction in energy consumption (20%) |
Increased landscape and physical activity area |
Improved air quality |
Reduced noise levels |
Reduction in water consumption (20%) |
Low income |
32.00 |
9.90 |
16.80 |
11.20 |
14.20 |
High income |
35.10 |
10.90 |
18.50 |
12.30 |
15.45 |
Measuring and demonstrating the social value of infrastructure
Work undertaken by the Global Infrastructure Hub shows the infrastructure spend multiplier to be roughly 1.5. In other words, for every $1.00 spent, the benefit to GDP is $1.50. For this reason, infrastructure is increasingly regarded as an economic “supercharger”. With the COVID-19 pandemic forcing the widescale adoption of a new set of fiscal rules, its importance to the fight back from global recession has been underlined. In the first half of 2020, ESG stocks outperformed non-ESG counterparts, proving that social value has never been more valuable. But key questions remain. How can social value be accurately measured? Can social value considerations inform procurement processes? And what can be done to demonstrate the social value of large scale projects to an often sceptical public?
Case study 5: Discrete Choice Experiment: Construction
Background
The Considerate Construction Scheme (CCS) scores and rates construction sites based on a number of areas that affect social value such as the environment and community impacts. A higher score indicates that the site has had a beneficial impact on these areas. Morgan Sindall Group, a leading UK construction and regeneration group, commissioned a study to estimate the value of compliance with the CCS in order to demonstrate social value for their projects which attain good CCS scores.
Method
The study employed a discrete choice experiment to elicit monetary values for the five different categories that make up the CCS score (Appearance; respecting the Community; Protecting the Environment; Safety; Valuing the Workforce). Through an online survey 2,000 respondents were presented with contextual information about the CCS scoring system. They were then set a series of eight choice tasks where they were asked to trade off scores in each CCS category with different levels of monetary compensation.
Results
Based on the respondents’ choices, WTP values were calculated for improved scores in each of the categories presented. The study found that safety was the most highly valued aspect of construction (it had a value of £262 for moving from Failure to Compliant and £44 for Compliant to Excellent), followed by community and environment. The WTP values calculated as part of the study enabled Morgan Sindall to estimate the total social value associated with its developments during the construction phase.
“With a wide range of green construction methods available, there is a need to assess each method’s value in order choose those that optimise social benefit through housing infrastructure.”
Case study 6: Wellbeing Valuation – Water Infrastructure
Background
Ofwat, the economic regulator of the UK’s water industry, set water companies the challenge to innovate the way in which they engage with and measure how their customers value aspects of their business. Anglian Water, the provider of water and wastewater services in the East of England, commissioned Simetrica to assess the impact of flooding and roadworks incidents on the wellbeing of its customers and to estimate the social value of this in monetary terms in order to assist Anglian Water with the development of its future business plan.
Method
The study used the wellbeing valuation approach. Four types of incidents affecting water customers were covered:
- water flooding
- internal (domestic) sewer flooding
- external sewer flooding and
- roadworks.
The study used five years of data (2011-2016) from the Annual Population Survey, which covers a range of socioeconomic questions for UK households. This was merged with data provided by Anglian Water on the time and location of flooding and roadworks incidents. This dataset was then used to estimate the relationship between flooding and roadworks incidents and wellbeing, measured as life satisfaction after controlling for a range of background factors including age, gender, and marital status. This was done to better isolate the relationship between the water incidents and wellbeing. The study then assessed the levels of monetary compensation required to fully offset the negative impacts of flooding and roadworks incidents.
Results
The key findings of the analysis were:
- The wellbeing impact per incident of each type of flooding is higher than for roadworks – the social cost of a roadworks incident was estimated at £31,735, compared to the average flooding incident of £390,552.
- The average internal sewer flooding incident has a higher wellbeing impact per property affected (social cost of £166,549) than the average external sewer flooding incident (social cost of £21,754). This was also higher than the average internal water flooding incident (social cost of £54,312).
The findings from this report were used by Anglian Water to help it set targets and incentives for these incidents, and the report was published as part of Anglian Water’s business plan submission to Ofwat as evidence to show how it will create social value for water customers.
Case study 7: Contingent Valuation – Social Infrastructure
Background
Libraries in England have an important role as providers of a range of services, from book-lending and computer access to children’s activities, training courses and meeting spaces. Understanding the social value of libraries is a complex issue due to the wide-ranging services that libraries provide and their inherently non-market nature. To help library service providers understand the value they contribute to society, Arts Council England funded a study (Fujiwara, Lawton and Mourato, 2019) to estimate the value of engagement in libraries.
“Understanding the social value of libraries is a complex issue due to the wide-ranging services that they provide and their inherently non-market nature. To understand their value to society, Arts Council England funded a study to estimate the value of engagement in libraries.”
Method
The study applied contingent valuation surveys to elicit monetary values for library services over and above core book-lending and computer/internet services. Among the 1,985 people who completed the survey, 1,200 responses were composed of library users (respondents who indicated that they used their local library in the last 12 months) and 735 of non-users.
The valuation section presented respondents with information on the range of services offered by local libraries and outlined current local government funding arrangements for libraries via the statement:
“Funding for the services that local libraries offer comes mainly from Local Government and is raised through Council Tax.”
The survey then presented respondents with a situation where, due to the current financial crisis and cuts in government funding, “Libraries in (the respondent’s) local area would no longer be able to offer the extra services, activities and programmes they currently offer unless more funds were raised via council taxes.”
Respondents were then asked to state how much they would be willing to pay to support libraries so that they could continue to deliver a full range of services through increased council taxes.
Results
The study found that average willingness to pay to maintain current library services (above the core book-lending and computer/internet services) among library users in England is £19.51/annum and £10.31/annum for non-users. Aggregating this to the whole of England this provides a total annual social value for local libraries, through the services they provide, of £723.4 million.
This is an excerpt from the RICS Insight Paper Measuring social value in infrastructure: Lessons from the public sector.
