The Impact of Wind Power Projects on Residential Property Values ...
The Impact of Wind Power Projects on Residential Property Values ... The Impact of Wind Power Projects on Residential Property Values ...
2. Previous Research Hedonic pricing models are frequently used to assess the marginal impacts
A particularly useful application
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A particularly useful applicati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the hed<strong>on</strong>ic regressi<strong>on</strong> model is to value n<strong>on</strong>-market goods –<br />
goods that do not have transparent and observable market prices. For this reas<strong>on</strong>, the hed<strong>on</strong>ic<br />
model is <str<strong>on</strong>g>of</str<strong>on</strong>g>ten used to derive value estimates <str<strong>on</strong>g>of</str<strong>on</strong>g> amenities such as wetlands (e.g., Mahan et al.,<br />
2000) or lake views (e.g., Seiler et al., 2001), and disamenities, such as proximity to and/or<br />
views <str<strong>on</strong>g>of</str<strong>on</strong>g> high-voltage transmissi<strong>on</strong> lines (HVTLs) (e.g. Des-Rosiers, 2002), fossil fuel power<br />
plants (Davis, 2008), roads (e.g. Bateman et al., 2001), cell ph<strong>on</strong>e towers (e.g. B<strong>on</strong>d and Wang,<br />
2007), and landfills (e.g., Thayer et al., 1992; Ready and Abdalla, 2005).<br />
<str<strong>on</strong>g>The</str<strong>on</strong>g>re are a number <str<strong>on</strong>g>of</str<strong>on</strong>g> useful reviews that describe the applicati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> hed<strong>on</strong>ic models in these<br />
circumstances (Kroll and Priestley, 1992; Farber, 1998; McCann, 1999; Bateman et al., 2001;<br />
Boyle and Kiel, 2001; Jacks<strong>on</strong>, 2001; Ready and Abdalla, 2005; Sim<strong>on</strong>s and Saginor, 2006;<br />
Sim<strong>on</strong>s, 2006b; Le<strong>on</strong>ard et al., 2008). 12 <str<strong>on</strong>g>The</str<strong>on</strong>g> large number <str<strong>on</strong>g>of</str<strong>on</strong>g> studies covered in these reviews<br />
dem<strong>on</strong>strate that hed<strong>on</strong>ic models are regularly used to investigate the interplay between home<br />
values and distance to potential disamenities, teasing out if and how sales prices are adversely<br />
affected depending <strong>on</strong> the distance <str<strong>on</strong>g>of</str<strong>on</strong>g> a typical home from a disamenity. For example, Carroll et<br />
al. (1996) use a hed<strong>on</strong>ic model to estimate a devaluati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> 16% for homes “close to” a chemical<br />
plant, with a 6.5% increase in sales price per mile away out to 2.5 miles, at which point effects<br />
fade entirely. Dale et al. (1999) find a maximum effect <str<strong>on</strong>g>of</str<strong>on</strong>g> -4% near a lead smelter, with sales<br />
prices increasing 2% for each mile away out to two miles, where effects again fade. Ready and<br />
Abdalla (2005) find maximum effects near landfills <str<strong>on</strong>g>of</str<strong>on</strong>g> -12.4%, which fade entirely outside 2,400<br />
feet, and maximum effects near c<strong>on</strong>fined animal feeding operati<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> -6.4%, which fade entirely<br />
outside <str<strong>on</strong>g>of</str<strong>on</strong>g> 1,600 feet. Meanwhile, studies <str<strong>on</strong>g>of</str<strong>on</strong>g> other energy infrastructure, such as HVTLs, find<br />
maximum effects <str<strong>on</strong>g>of</str<strong>on</strong>g> -5.7% for homes adjacent to a HVTL tower, and an increase in prices <str<strong>on</strong>g>of</str<strong>on</strong>g><br />
0.018% per foot away from the tower out to 300 feet (Hamilt<strong>on</strong> and Schwann, 1995), and<br />
maximum effects <str<strong>on</strong>g>of</str<strong>on</strong>g> -14% for homes within 50 feet <str<strong>on</strong>g>of</str<strong>on</strong>g> a HVTL, but no effect for similar homes<br />
at 150 feet (Des-Rosiers, 2002). Further, for fossil fuel power plants, Davis (2008) finds average<br />
adverse effects <str<strong>on</strong>g>of</str<strong>on</strong>g> between 3 and 5% inside <str<strong>on</strong>g>of</str<strong>on</strong>g> two miles but that those effects fade entirely<br />
outside <str<strong>on</strong>g>of</str<strong>on</strong>g> that distance range.<br />
In additi<strong>on</strong> to investigating how sales prices change with distance to a disamenity, hed<strong>on</strong>ic<br />
models have been used to investigate how prices have changed over time. For instance, sales<br />
prices have sometimes been found to rebound after the removal <str<strong>on</strong>g>of</str<strong>on</strong>g> a disamenity, such as a lead<br />
smelter (Dale et al., 1999), or to fade over time, as with HVTLs (Kroll and Priestley, 1992) or<br />
spent fuel storage facilities (Clark and Allis<strong>on</strong>, 1999). Finally, hed<strong>on</strong>ic models have been used<br />
to estimate how views <str<strong>on</strong>g>of</str<strong>on</strong>g> a disamenity affect sales prices. Des-Rosiers (2002), for example,<br />
finds that homes adjacent to a power line and facing a HVTL tower sell for as much as 20% less<br />
than similar homes that are not facing a HVTL tower.<br />
characteristic informati<strong>on</strong>) and rigorous methodology, hed<strong>on</strong>ic models can also be used as appraisal models.<br />
Automated valuati<strong>on</strong> models cannot, however, be reliably used to measure marginal effects because they do not<br />
employ sufficient informati<strong>on</strong> to do so, and, more importantly, AVMs do not hold c<strong>on</strong>trolling characteristics<br />
c<strong>on</strong>stant, which could bias any resulting estimates <str<strong>on</strong>g>of</str<strong>on</strong>g> marginal effects.<br />
12 For further discussi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the hed<strong>on</strong>ic model and its applicati<strong>on</strong> to the quantificati<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> envir<strong>on</strong>mental stigmas in<br />
comparis<strong>on</strong> to other methods see Jacks<strong>on</strong> (2005).<br />
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