Real estate research provides evidence that properties potentially exposed to perceived or actual risks may experience price impacts. Looking Under the Hood reviews publications that illustrate the theoretical, methodological, and data challenges faced by scholars and practitioners studying detrimental conditions and their impacts on property values.
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In the past two decades, the surge in oil shale extraction in the United States has prompted extensive research on the impact of fracking on residential properties, mainly focusing on environmental concerns like methane emissions and groundwater contamination. However, the influence of fracking infrastructure, particularly compressor stations and dehydration facilities, on nearby home prices has been relatively understudied. Unlike traditional pipeline structures, these facilities present unique challenges such as noise pollution and visual dissonance with residential areas. This article by Roddewig, Samuels, Baxendale, and De Marinis [1] aims to bridge this gap by analyzing the impact of compressor stations on fracking gas pipelines in New Jersey and Pennsylvania, shedding light on the relationship between infrastructure and residential property values.
The case study of the Transco Compressor Station 505 explosion in Branchburg, New Jersey, in 2013, which injured 13 workers, examined its effect on nearby home prices using sales data from 2000 to 2017. Despite the incident, proximity to the station did not seem to significantly affect home prices, with properties within a quarter-mile often outperforming those farther away. Although there was a change in pricing trends in 2015, with homes farther from the station experiencing faster price increases, overall, the incident had minimal impact on property values, highlighting the resilience of the local housing market.
In Chester, Pennsylvania, the Eagle Compressor Station incidents between 2001 and 2015, including a notable fire in 2015, were analyzed for their effect on nearby property prices. Despite fluctuations in home prices over the years, the study found that variations in home characteristics and neighborhood factors likely influenced property prices more significantly than proximity to the compressor station. The analysis concluded that there was no substantial evidence of the station or its incidents significantly affecting adjacent property prices.
Unlike the previous stations, the Downingtown Compressor Station in West Bradford Township, Pennsylvania, experienced no reported incidents from 2001 to 2015. However, analysis of home sales data in the Highlands neighborhood revealed that homes within 1,000 feet of the station sold at lower prices per square foot compared to those farther away, with an average differential of approximately -3.2% to -6.5%. Adjustments for house characteristics confirmed this trend, suggesting a negative impact on property values within approximately 800 feet of the station.
The Marietta Compressor Station 24A in Lancaster County, Pennsylvania, witnessed an incident in 2012 involving a gas leak and explosion, resulting in injuries but no gas release or fire. Analysis of home sales data within one mile of the station revealed a temporary impact on townhome prices around the incident, particularly for homes within 500 or 1,000 feet, although this effect diminished by 2015 or 2016. Single-family detached home prices showed a temporary impact preceding the 2012 incident, with no decrease exceeding approximately -10.0% within 1,000 feet of the station. Overall, the study suggested that any impact on home prices was temporary and limited to specific distances from the compressor station.
The case study research on the impact of fracking transmission line facilities on nearby home prices highlights several key findings. Firstly, similar to existing literature on pipeline proximity, the data from compressor station case studies suggest no consistent adverse impact on nearby home prices. Prices per square foot for homes closest to the pipelines varied, sometimes even exceeding those at greater distances, emphasizing the need for location-specific analysis. Secondly, incidents such as fires or emissions at compressor stations did not necessarily lead to decreased nearby home prices across all studies, with some cases showing inconclusive results. Thirdly, when impacts on home prices did occur due to compressor station incidents, they tended to be temporary, lasting from a few months to a few years before returning to pre-incident levels. Additionally, outliers in regression analysis may skew the relationship between price trends and distance from the facility, necessitating careful consideration. Furthermore, environmental factors like high-voltage transmission lines can compound the effects on home prices and need to be factored into the analysis. Despite potential limitations such as low R-squared values in regression models, comparing changing relationships between trend lines over time can aid in understanding the effects of proximity to fracking transmission line facilities on prices. Additionally, adjusting for differences between homes, including variables like lot size and construction dates, is crucial for accurate analysis. However, the study acknowledges limitations, including reliance on case study and paired-data analysis methods, which may not fully capture the complexity of the relationship between proximity to environmental factors and home prices. Moreover, data constraints and the absence of seller disclosure information in the analyzed sales data may limit the generalizability of the results to other appraisal situations.
[1]Roddewig, Richard J., Michael J. Samuels, Anne S. Baxendale, and Joseph R. De Marinis. "Applying the Case Study Method to Measure Possible Impact of Proximity to Fracking Transmission Line Facilities on Home Prices." The Appraisal Journal (Winter 2023).