TODAY’S STUDY: REAL ESTATE VALUES ARE UNAFFECTED BY WIND DEVELOPMENT
A Spatial Hedonic Analysis of the Effects of Wind Energy Facilities on Surrounding Property Values in the United States
Ben Hoen, Jason P. Brown, Thomas Jackson, Ryan Wiser, Mark Thayer and Peter Cappers, August 2013 (Lawrence Berkeley National Laboratory)
Previous research on the effects of wind energy facilities on surrounding home values has been limited by small samples of relevant home-sale data and the inability to account adequately for confounding home-value factors and spatial dependence in the data. This study helps fill those gaps. We collected data from more than 50,000 home sales among 27 counties in nine states. These homes were within 10 miles of 67 different wind facilities, and 1,198 sales were within 1 mile of a turbine—many more than previous studies have collected. The data span the periods well before announcement of the wind facilities to well after their construction. We use OLS and spatial-process difference-in-difference hedonic models to estimate the home-value impacts of the wind facilities; these models control for value factors existing before the wind facilities’ announcements, the spatial dependence of unobserved factors effecting home values, and value changes over time. A set of robustness models adds confidence to our results. Regardless of model specification, we find no statistical evidence that home values near turbines were affected in the post-construction or post-announcement/pre-construction periods. Previous research on potentially analogous disamenities (e.g., high-voltage transmission lines, roads) suggests that the property-value effect of wind turbines is likely to be small, on average, if it is present at all, potentially helping to explain why no evidence of an effect was found in the present research.
In 2012, approximately 13 gigawatts (GW) of wind turbines were installed in the United States, bringing total U.S. installed wind capacity to approximately 60 GW from more than 45,000 turbines (AWEA, 2013). Despite uncertainty about future extensions of the federal production tax credit, U.S. wind capacity is expected by some to continue growing by approximately 5–6 GW annually owing to state renewable energy standards and areas where wind can compete with natural gas on economics alone (Bloomberg, 2013); this translates into approximately 2,750 turbines per year.1 Much of that development is expected to occur in relatively populated areas (e.g., New York, New England, the Mid-Atlantic and upper Midwest) (Bloomberg, 2013).
In part because of the expected wind development in more-populous areas, empirical investigations into related community concerns are required. One concern is that the values of properties near wind developments may be reduced; after all, it has been demonstrated that in some situations market perceptions about an area’s disamenities (and amenities)2 are capitalized into home prices (e.g., Boyle and Kiel, 2001; Jackson, 2001; Simons and Saginor, 2006). The published research about wind energy and property values has largely coalesced around a finding that homes sold after nearby wind turbines have been constructed do not experience statistically significant property value impacts. Additional research is required, however, especially for homes located within about a half mile of turbines, where impacts would be expected to be the largest. Data and studies are limited for these proximate homes in part because setback requirements generally result in wind facilities being sited in areas with relatively few houses, limiting available sales transactions that might be analyzed.
This study helps fill the research gap by collecting and analyzing data from 27 counties across nine U.S. states, related to 67 different wind facilities. Specifically, using the collected data, the study constructs a pooled model that investigates average effects near the turbines across the sample while controlling for the local effects of many potentially correlated independent variables. Property-value effect estimates are derived from two types of models: (1) an ordinary least squares (OLS) model, which is standard for this type of disamenity research (see, e.g., discussion in Jackson, 2003; Sirmans et al., 2005), and (2) a spatial-process model, which accounts for spatial dependence. Each type of model is used to construct a difference-indifference (DD) specification—which simultaneously controls for preexisting amenities or disamenities in areas where turbines were sited and changes in the community after the wind facilities’ construction was announced—to estimate effects near wind facilities after the turbines were announced and, later, after the turbines were constructed.3
The remainder of the report is structured as follows. Section 2 reviews the current literature. Section 3 details our methodology. Section 4 describes the study data. Section 5 presents the results, and Section 6 provides a discussion and concluding remarks…
Wind energy facilities are expected to continue to be developed in the United States. Some of this growth is expected to occur in more-populated regions, raising concerns about the effects of wind development on home values in surrounding communities.
Previous published and academic research on this topic has tended to indicate that wind facilities, after they have been constructed, produce little or no effect on home values. At the same time, some evidence has emerged indicating potential home-value effects occurring after a wind facility has been announced but before construction. These previous studies, however, have been limited by their relatively small sample sizes, particularly in relation to the important population of homes located very close to wind turbines, and have sometimes treated the variable for distance to wind turbines in a problematic fashion. Analogous studies of other disamenities—including high-voltage transmission lines, landfills, and noisy roads—suggest that if reductions in property values near turbines were to occur, they would likely be no more than 3%–4%, on average, but to discover such small effects near turbines, much larger amounts of data are needed than have been used in previous studies. Moreover, previous studies have not accounted adequately for potentially confounding home-value factors, such as those affecting home values before wind facilities were announced, nor have they adequately controlled for spatial dependence in the data, i.e., how the values and characteristics of homes located near one another influence the value of those homes (independent of the presence of wind turbines).
This study helps fill those gaps by collecting a very large data sample and analyzing it with methods that account for confounding factors and spatial dependence. We collected data from more than 50,000 home sales among 27 counties in nine states. These homes were within 10 miles of 67 different then-current or existing wind facilities, with 1,198 sales that were within 1 mile of a turbine (331 of which were within a half mile)—many more than were collected by previous research efforts. The data span the periods well before announcement of the wind facilities to well after their construction. We use OLS and spatial-process difference-indifference hedonic models to estimate the home-value impacts of the wind facilities; these models control for value factors existing prior to the wind facilities’ announcements, the spatial dependence of home values, and value changes over time. We also employ a series of robustness models, which provide greater confidence in our results by testing the effects of data outliers and influential cases, heterogeneous inflation/deflation across regions, older sales data for multi-sale homes, the distance from turbines for homes in our reference case, and the amount of time before wind-facility announcement for homes in our reference case.
Across all model specifications, we find no statistical evidence that home prices near wind turbines were affected in either the post-construction or post-announcement/preconstruction periods. Therefore, if effects do exist, either the average mpacts are relatively small (within the margin of error in the models) and/or sporadic (impacting only a small subset of homes). Related, our sample size and analytical methods enabled us to bracket the size of effects that would be detected, if those effects were present at all. Based on our results, we find that it is highly unlikely that the actual average effect for homes that sold in our sample area within 1 mile of an existing turbine is larger than +/-4.9%. In other words, the average value of these homes could be as much as 4.9% higher than it would have been without the presence of wind turbines, as much as 4.9% lower, the same (i.e., zero effect), or anywhere in between. Similarly, it is highly unlikely that the average actual effect for homes that sold in our sample area within a half mile of an existing turbine is larger than +/-9.0%. In other words, the average value of these homes could be as much as 9% higher than it would have been without the presence of wind turbines, as much as 9% lower, the same (i.e., zero effect), or anywhere in between.
Regardless of these potential maximum effects, the core results of our analysis consistently show no sizable statistically significant impact of wind turbines on nearby property values. The maximum impact suggested by potentially analogous disamenities (high-voltage transmission lines, landfills, roads etc.) of 3%-4% is at the far end of what the models presented in this study would have been able to discern, potentially helping to explain why no statistically significant effect was found. If effects of this size are to be discovered in future research, even larger samples of data may be required. For those interested in estimating such effects on a more micro (or local) scale, such as appraisers, these possible data requirements may be especially daunting, though it is also true that the inclusion of additional market, neighborhood, and individual property characteristics in these more-local assessments may sometimes improve model fidelity.