Environmental Valuation & Cost-Benefit News

Link: http://www.appraisalinstitute.org/taj/

Abstract: In this study, over 1,200 home sales in 1998-2007 are aggregated into four study areas with a 345-kV transmission line. Field data are collected on the sale properties relative to proximity to and visibility of transmission line towers, and the extent of encumbrance by a transmission line easement. A multiple regression model is used to test whether the sale prices are affected by line proximity, tower visibility, or property encumbrance. In both continuous distance and distance zone models, the proximity and visibility variables typically fail to be statistically significant. The only variable that appears to have any systematic effect is the encumbrance variable; however, its magnitude is generally small.
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While the literature on the effect of HVTLs on property values is extensive, it is of uneven quality. ... The results of these studies can be generally summarized as follows:
* Over time, there is a consistent pattern with about half of the studies finding negative property value effects and half finding none.
* When effects have been found, they tend to be small; almost always less than 10% and usually in the range of 3%-6%.
* Where effects are found, they decay rapidly as distance to the lines increases and usually disappear at about 200 feet to 300 feet (61 meters to 91 meters).
* Two studies investigating the behavior of the effect over time find that, where there are effects, they tended to dissipate over time.
* There does not appear to have been any change in the reaction of markets to high-voltage transmission line proximity after the results of two widely publicized Swedish health-effects studies were preliminarily released in 1992.
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Overall, the base models have very good explanatory power; the independent variables are generally statistically significant with the anticipated sign and are of reasonable magnitudes.
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There are two basic approaches to testing for proximity effects: (1) distance as a categorical variable representing distance zones, and (2) distance measured as a continuous variable. Both approaches are investigated
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[The results] are striking in that there is no systematic effect of proximity to the transmission line corridor on sale price. The only exception is in the continuous distance specification. In Models 1, 3, and 4, the distance variable is negative and statistically significant at either the 95% or 90% level. However, further analysis reveals that the distance variable of Model 1 becomes insignificant once encumbrance is accounted for. Further, even though both Models 3 and 4 show a significant distance effect, Model 3 also shows an unexpected positive effect of structure visibility.
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The only variable that appears to have any kind of systematic effect is the encumbrance variable, which for A2 and A4 is of the expected sign in both the Zone Distance and Continuous Distance models and is statistically significant at either the 90% or 95% level. However its magnitude is generally small. For example, for A2 the reported coefficient on the encumbrance variable in Continuous Distance Model 2 (Table 9) implies an effect of approximately $3,000 for a property with 12,000 square feet encumbered and a sale price of $300,000.21
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With respect to the impact of visibility of the transmission tower, the results did not indicate any systematic impact with respect to sign or magnitude. The only time when the visibility variable was statistically significant, the sign of the coefficient was positive.
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There is no evidence here to support the hypothesis of greater vulnerability of values to HVTL effects in a down market, but it has to be recognized that the number of observations on the key transmission line variables is small for just two sale years and more observations over a longer period would yield a more definitive result.
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The results supports the conclusion that the higher-valued properties show no greater sensitivity to HVTL variables than lower-valued properties.
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by James A Chalmers and Frank A Voorvaart.
The Appraisal Journal via the Appraisal Institute www.AppraisalInstitute.org
Volume 77, Issue 3; Summer, 2009; pages 227-246