TODAY’S STUDY: NO HARM TO PROPERTY VALUE FROM WIND PROJECTS -- NEW STUDY

Relationship between Wind Turbines and Residential Property Values in Massachusetts

Carol Atkinson-Palombo and Ben Hoen, January 9, 2014 (University of Connecticut and Lawrence Berkeley National Laboratory)

Executive Summary

This study investigates a common concern of people who live near planned or operating wind developments: How might a home’s value be affected by the turbines? Previous studies on this topic, which have largely coalesced around non-significant findings, focused on rural settings. Wind facilities in urban locations could produce markedly different results. Nuisances from turbine noise and shadow flicker might be especially relevant in urban settings, where negative features, such as landfills or high voltage utility lines, have been shown to reduce home prices. To determine if wind turbines have a negative impact on property values in urban settings, this report analyzed more than 122,000 home sales, between 1998 and 2012, that occurred near the current or future location of 41 turbines in densely-populated Massachusetts communities. The term “urban” in this document includes both urban and suburban areas.

The results of this study do not support the claim that wind turbines affect nearby home prices. Although the study found the effects from a variety of negative features (such as electricity transmission lines and major roads) and positive features (such as open space and beaches) generally accorded with previous studies, the study found no net effects due to the arrival of turbines in the sample’s communities.

Weak evidence suggests that the announcement of the wind facilities had a modest adverse impact on home prices, but those effects were no longer apparent after turbine construction and eventual operation commenced. The analysis also showed no unique impact on the rate of home sales near wind turbines. These conclusions were the result of a variety of model and sample specifications detailed later in this report.

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Overview

Wind power generation has grown rapidly in recent decades. In the United States, wind development centered initially on areas with relatively sparse populations in the Plains and West. Increasingly, however, wind development is occurring in more populous, urbanized areas, prompting additional concerns about the effects of wind turbine construction on residents in those areas.

One important concern is the potential for wind turbines to create a “nuisance stigma”—due to turbine-related noise, shadow flicker, or both—that reduces the desirability and thus value of nearby homes. Government officials who are called on to address this issue need additional reliable research to inform regulatory decisions, especially for understudied populous urban areas. Our study helps meet this need by examining the relationship between home prices and wind facilities in densely-populated Massachusetts.

A variety of methods can be used to explore the effects of wind turbines on home prices. Statistical analysis of home sales, using a hedonic model, is the most reliable methodology because it (a) uses actual housing market sales data rather than perceptions of potential impacts; (b) accounts for many of the other, potentially confounding, characteristics of the home, site, neighborhood and market; and (c) is flexible enough to allow a variety of potentially competing aspects of wind development and proximity to be tested simultaneously. Previous studies using this hedonic modeling method largely have agreed that post-construction home-price effects (i.e., changes in home prices after the construction of nearby wind turbines) are either relatively small or sporadic. A few studies that have used hedonic modeling, however, have suggested significant reductions in home prices after a nearby wind facility is announced but before it is built (i.e., post-announcement, pre-construction) owing to an “anticipation effect.” Previous research in this area has focused on relatively rural residential areas and larger wind facilities with significantly greater numbers of turbines.

This previous research has done much to illuminate the effects of wind turbines on home prices, but a number of important knowledge gaps remain.

Our study helps fill these gaps by exploring a large dataset of home sales occurring near wind turbine locations in Massachusetts. We analyze 122,198 arm’s-length single-family home sales, occurring between 1998 and 2012, within 5 miles of 41 wind turbines in Massachusetts. The home sales analyzed in this study occurred in one of four periods based on the development schedule of the nearby turbines (see Figure 2).2

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To estimate the effect proximity to turbines has on home sale prices, we employ a hedonic pricing model in combination with a suite of robustness tests that explore a variety of different model specifications and sample sets, organized around the following five research questions:

Q1) Have wind facilities in Massachusetts been located in areas where average home prices were lower than prices in surrounding areas (i.e., a “pre-existing price differential”)?

Q2) Are post-construction (i.e., after wind-facility construction) home price impacts evident in Massachusetts and how do Massachusetts results contrast with previous results estimated for more rural settings?

Q3) Is there evidence of a post-announcement/pre-construction effect (i.e., an “anticipation effect”)?

Q4) How do impacts near turbines compare to the impacts of amenities and disamenities also located in the study area, and how do they compare with previous findings?

Q5) Is there evidence that houses near turbines that sold during the post-announcement and post-construction periods did so at lower rates (i.e., frequencies) than during the pre-announcement period?

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The study makes five major unique contributions:

1. It uses the largest and most comprehensive dataset ever assembled for a study linking wind facilities to nearby home prices.

2. It encompasses the largest range of home sale prices ever examined.

3. It examines wind facilities in urban areas (with relatively high-priced homes), whereas previous analyses have focused on rural areas (with relatively low-priced homes).

4. It largely focuses on wind facilities that contain fewer than three turbines, while previous studies have focused on large-scale wind facilities (i.e., wind farms).

5. Our modeling approach controls for seven environmental amenities and disamenities in the study area, allowing the effect of wind facilities to be compared directly to the effects of these other factors.

The models perform exceptionally well given the volatility in the housing market during the study period, with an adjusted-R2 of approximately 0.80 and highly statistically significant and appropriately signed controlling parameters (e.g., square feet, acres, and age of home at the time of sale). The amenity and disamenity variables (proximity to beaches, open space, electricity transmission lines, prisons, highways, major roads, and landfills) are significant in a large portion of the models and appropriately signed—indicating that the models discern a strong relationship between a home’s environment and its selling price—and generally accord with the results of previous studies. To test whether the results of the analysis would change if the model was specified in a different way, or run using a differently-specified dataset, we ran a suite of robustness tests. The results generated from the robustness tests changed very little, suggesting that our approach is not dependent on the model specification or the data selection.

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The results do not support the claim that wind turbines affect nearby home prices. Despite the consistency of statistical significance with the controlling variables, statistically significant results for the variables focusing on proximity to operating turbines are either too small or too sporadic to be apparent. Post-construction home prices within a half mile of a wind facility are 0.5% higher than they were more than 2 years before the facility was announced (after controlling for market inflation/deflation). This difference is not statistically significant. Post-announcement, pre-construction home prices within a half mile are 2.3% lower than their pre-announcement levels (after controlling for inflation/deflation), which is also a non-significant difference, though one of the robustness models suggests weak evidence that wind-facility announcement reduced home prices.

An additional tangential, yet important, result of the analysis is the finding of a statistically significant “pre-existing price differential”: prices of homes that sold more than 2 years before a future nearby wind facility was announced were 5.1% lower than the prices of comparable homes farther away from the future wind location. This indicates that wind facilities in Massachusetts are associated with areas where land values are lower than the surrounding areas, and, importantly, this “pre-existing price differential” needs to be accounted for in order to correctly measure the “post construction” impact of the turbines. Finally, our analysis finds no evidence of a lower rate (i.e., frequency) of home sales near the turbines.

As discussed in the literature review, the effects of wind turbines may be somewhat context specific. Nevertheless, the stability of the results across models and across subsets of the data, and the fact that they agree with the results of existing literature, suggests that the results may be generalizable to other U.S. communities, especially where wind facilities are located in more urban settings with relatively high-priced homes. These results should inform the debate on actual impacts to communities surrounding turbines. Additional research would augment the results of this study and previous studies, and our report concludes with recommendations for future work…

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Conclusion

This study investigates a common concern of people who live near planned or operating wind developments: How might a home’s value be affected by the turbines? Previous studies on this topic, which have largely coalesced around non-significant findings, focused on rural settings. Wind facilities in urban locations could produce markedly different results. Nuisances from turbine noise and shadow flicker might be especially relevant in urban settings where other negative features, such as landfills or high voltage utility lines, have been shown to reduce home prices. To determine if wind turbines have a negative impact on property values in urban settings, this report analyzed more than 122,000 home sales, between 1998 and 2012, that occurred near the current or future location of 41 turbines in densely-populated Massachusetts.

The results of this study do not support the claim that wind turbines affect nearby home prices. Although the study found the effects on home prices from a variety of negative features (such as electricity transmission lines, landfills, prisons and major roads) and positive features (such as open space and beaches) that accorded with previous studies, the study found no net effects due to the arrival of turbines in the sample’s communities. Weak evidence suggests that the announcement of the wind facilities had an adverse impact on home prices, but those effects were no longer apparent after turbine construction and eventual operation commenced. The analysis also showed no unique impact on the rate of home sales near wind turbines. These conclusions were the result a variety of model and sample specifications.

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Suggestions for Further Research

Although our study is unparalleled in its methodological scope and dataset compared to the previous literature in the subject area, we recommend a number of areas for future work. Because much of the existing work on wind turbines has focused on rural areas—which is where most wind facilities have been built—there is no clear understanding of how residents would view the introduction of wind turbines in landscapes that are already more industrialized. Therefore, investigating residents’ perceptions, through survey instruments, of wind turbines in more urbanized settings may be helpful. Policy-makers may also be interested in understanding the environmental attitudes and perceptions towards wind turbines of people who purchase houses near wind turbines after they have been constructed. Also, our study has aggregated the effects of wind turbines on the price of single-family houses for the study area as a whole. Although the data span an enormous range of sales prices, and contain the highest mean value of homes yet studied, it might be fruitful to analyze impacts partitioned by sales price or neighborhood to discover whether the effects vary with changes in these factors.

Finally, in our study we did not investigate the ownership structure of the turbines (i.e., in Massachusetts some projects benefit town budgets while others are owned by private entities) and assess whether any benefits accrued to surrounding communities, factors that the existing literature suggests are important determinants of community perceptions. This was considered beyond the scope of the existing study, but could be addressed in future research.

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