Values in the Wind: A Hedonic Analysis of Wind Power Facilities
Martin D. Heintzelman and Carrie M. Tuttle|July 16, 2011
This paper uses data on 11,331 property transactions over 9 years in Northern New York to explore the eff ects of new wind facilities on property values. The authors use a fixed effects framework to control for omitted variables and endogeneity biases. They found that nearby wind facilities signi cantly reduce property values in two of the three counties studied. The results indicate that existing compensation to local homeowners/communities may not be sufficient to prevent a loss of property values. The conclusions of the report are provided below. The full paper can be accessed by clicking on the link a t the bottom of this page.
This paper uses data on 11,331 property transactions over 9 years in Northern New York to explore the eff ects of new wind facilities on property values. The authors use a fixed effects framework to control for omitted variables and endogeneity biases. They found that nearby wind facilities signi cantly reduce property values in two of the three counties studied. The results indicate that existing compensation to local homeowners/communities may not be sufficient to prevent a loss of property values. The conclusions of the report are provided below. The full paper can be accessed by clicking on the link a t the bottom of this page.
Conclusion
From a policy perspective, these results suggest that existing compensation schemes may not be fully compensating those landowners near wind developments, in some areas, for the externality costs that are being imposed. Existing PILOT programs and compensation to individual landowners are implicitly accounted for in this analysis since we would expect these payments to be capitalized into sales prices, and still we found largely negative impacts in two of our three counties. This suggests that landowners, particularly those who do not have turbines on their properties and are thus not receiving direct payments from wind developers, are being harmed and have an economic case to make for more compensation. That is, while the `markets' for easements and PILOT programs may be properly accounting for harm to those who allow parcels on their property, it appears not to be accounting for harm to others nearby. This is a clear case of an uncorrected externality. If, in the future, developers are forced to account for this externality through increased payments this would obviously increase the cost to developers and make it that much more difficult to economically justify wind projects. Importantly, in Lewis County, landowners do appear to be receiving sufficient compensation to prevent decay of property values. This study does not say anything about the societal benefits from wind power and should not be interpreted as saying that wind development should be stopped, even when the property value effects are negative. If, in fact, wind power is being used to displace fossil-based electricity generation it may still be that the environmental benefits of such a trade exceed the costs. However, in comparing those environmental benefits, we must include not only costs to developers (which include easement payments and PILOT programs), but also these external costs to property owners local to new wind facilities. Property values are an important component of any cost-benefit analysis and should be accounted for as new projects are proposed and go through the approval process.
Finally, this paper breaks with the prior literature including any statistically significant property-value impacts from wind facilities. We believe that this stems from our empirical approach which controls for omitted variables and endogeneity biases and employs a large sample size with reasonably complete data on home and property characteristics. Future studies which expand this sort of analysis to wind and other renewable power facilities in other regions are imperative to understanding the big picture of what will happen as these technologies grow in prominence.
