The Hidden Costs of Participation: Transaction Costs in Urban Stormwater Grant Programs

Excess stormwater runoff is a major environmental challenge in the U.S. Green infrastructure, including rain gardens, permeable pavement, and backyard infiltration, offers an effective solution for mitigating the negative impacts of excess stormwater runoff in urban landscapes. In an effort to encourage homeowners to adopt these practices, many cities have implemented voluntary, cost-sharing stormwater grant programs. Despite financial incentives, households’ participation in these programs has been low. Recent research suggests that transaction costs may be an important barrier to the adoption of urban stormwater BMPs. To investigate this, we conducted a choice experiment to estimate the effect of specific transaction costs associated with BMP program features on residents’ participation. Our findings indicate that residents perceive high transaction costs related to factors such as longer time spent on application paperwork and coordinating contractors, installation delays, and the absence of on-call technical support, which can affect their enrolment decision. Our WTA estimates show that perceived transaction costs are sufficient to offset the financial incentive of the cost-share stormwater program.