Coase in the Cul-de-sac

The street my family used to live on has a cul de sac at the end of it. Recently, I heard that a family on this street, the Gondi’s, were going to sell their house at the end of the cul de sac, and this was a big deal! It is the most expensive house in the entire neighborhood not only because the two physicians who lived there invested a lot of money into it, but more importantly because the Gondis own an empty lot next to the house which they never sold. This immaculate housing lot is filled with dense green trees that create a positive externality of a tranquil viewing for other neighbors. Additionally, it makes the club good of the cul-de-sac less rivalrous. However, with the news that the Gondis are selling their house comes the fear that this empty lot will also be sold. 

To make up (potentially inflated) numbers to illustrate this, let’s say the value of the house combined with the empty lot is $1.2 million (house: 1 million + empty lot: 200k). The new homeowner may decide to buy the house and then sell the adjacent empty lot to someone else to minimize their costs. When a new house is being built on the empty lot it will create negative externalities such as loud construction equipment, red clay tire tracks, and porta-johns to take the place of green trees. Therefore, given sufficiently low transactional costs of private bargaining, a potential Coasian solution could take place. The neighbors on the street could decide to pay a collected amount to the new home owner to keep the empty lot unscathed. However, if the cost to contribute towards the green lot is greater than the benefit of the scenic view then people may just have to get used to CAT excavators in the cul de sac or pack up and move!