Real estate pricing 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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McLaughlin[1] studied the property value impacts from trichloroethylene (TCE) contamination in Washington County, Minnesota. The research was unusual because the author analyzed two separate dates of value: before (1995-2002) and after (2003-2006) the implementation of a disclosure requirement for environmental contamination. The disclosure requirement for homes within the Baytown Site special well construction area (SWCA) was enacted in 2003. The contamination had been affecting the groundwater in the Baytown Township since the late 1980s. The Baytown site was added to the EPA’s NPL in 1995. This plume covered approximately seven square miles and encompassed approximately 650 homes. With many homes and businesses in the area that are groundwater-dependent mitigation using carbon filters began in 2000; however, the source of contamination was never found, and remediation did not happen.
The author obtained sale information from the Washington County tax assessor. The residential dataset ranged from January 1, 1995, to December 31, 2006, and included approximately 38,611 transactions. Information on plume geography, testing levels, and disclosure requirements were obtained from the Minnesota Pollution Control Agency and the Minnesota Department of Health.
The hedonic output revealed coefficients of -3% for contaminated homes without Granular Activated Carbon (GAC) filters and -2.3% for homes within the SWCA during the period from 1995 to 2002. However, only the variable for contaminated homes without GAC filters was significant at the 10% significance level. For homes that sold from 2003 to 2006, after the disclosure requirement was enacted, a -7.4% statistically significant diminution in value was observed within the SWCA. In the after condition the coefficient for contaminated homes without GAC filters was not statistically significant.