Wind and Property Values: Relation Unknown

By Kennedy Maize

Washington, Feb. 15, 2010 — Local opponents of wind farm developments often claim that the energy projects depress their property values. It’s a difficult issue to settle. The Department of Energy’s Lawrence Berkeley National Laboratory claimed last December in a $500,000 study, three years in the works – “The Impact of Wind Power Projects on Residential Property Values in the United States: A Multi-Site Hedonic Analysis” – that the fear of property value declines is bogus.

The DOE study concluded that there was no evidence property values near wind farms were “consistently, measurably, and significantly affected by either the view of wind facilities or the distance of the home to those facilities.” A Lawrence Berkeley press release quoted the study’s author, consultant Ben Hoen, “Neither the view of wind energy facilities nor the distance of the home to those of the homes to those facilities was found to have any consistent, measurable, and significant effect on the selling prices of nearby homes.”

The study team collected data on 7,500 single-family home sales for residences within 10 miles of 24 current wind projects in nine states, according the LBNL press release. The sales took place between 1996 and 2007.

The study drew praise from wind developers. Denise Bode, head of the American Wind Energy Association, the industry’s Washington lobbying group, said, “The conclusions of this study could not be more definitive—wind farms do not weaken property values. These important research findings offer good news for those communities that might be considering the location of wind farms nearby. Wind energy has multiple benefits: it creates jobs, reduces greenhouse gases, and delivers direct economic benefits to rural communities. Now we can also say that wind energy has no impact on property values.”

Not so fast, Denise. Albert R. Wilson, a national expert on real estate valuation, got wind of the study, looked at it, and found its methodology dodgy. His target was the way the LBNL researchers used “hedonic analysis” in their paper.

The LBNL study rests on regression analysis, which is what hedonic analysis means. In a private paper – “Wind Farms, Residential Property Values, and Rubber Rulers” – Wilson explained: “A regression is a statistical process that attempts to quantify a hypothetical relationship between certain factors (explanatory variables) and the value of an outcome (dependent variable).”

Economists Fritz Roka and Raymond Palmquist at North Carolina State University note, “Hedonic techniques have attracted the interest of economists as a means of measuring values of non-market goods. By studying the market transactions of differentiated products such as automobiles and houses, implied values and corresponding demand schedules can be estimated for underlying characteristics such as automobile safety features, two-car garages, and air quality of residential neighborhoods.”

Wilson adds that there are “literally thousands of possible real estate regression models.” There is also “a well developed and tested set of standards” to guide model choices, he says. For the LBNL report, Wilson says, “There is no evidence whatever” that the researchers “employed any standards.”

It also appears, Wilson says, that the LBNL report omitted important variables. The LBNL model may include sales prices in areas of declining population, where prices are not comparable to areas of increasing population, demand, and housing prices. The LBNL analysis, says Wilson, aggregates sales data nationwide, which is “a gross oversimplification that cannot provide for the specificity required to answer a micro-question such as an influence on sales price from a highly localized condition – distance to or view of a wind energy project.”

Wilson says he has “no opinion on the influence of wind farms on residential sales prices.” But his concerns with methodology lead him to argue that the LBNL report “should not be given serious consideration for any policy purpose. The underlying methods cannot be show to be reliable or accurate.”

So where does that leave us on the question of whether windmills reduce property values? After three years and half-a-million in research, the question, in my mind at least, remains unanswered.