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The Impact of Wind Power Projects on Residential Property Values ...

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4. Base Hed<strong>on</strong>ic Model<br />

This secti<strong>on</strong> uses the primary hed<strong>on</strong>ic model (“Base Model”) to assess whether residential sales<br />

prices are affected, in a statistically measurable way, by views <str<strong>on</strong>g>of</str<strong>on</strong>g> and proximity to wind power<br />

facilities. In so doing, it simultaneously tests for the presence <str<strong>on</strong>g>of</str<strong>on</strong>g> the three potential property<br />

value stigmas associated with wind power facilities: Area, Scenic Vista, and Nuisance. This<br />

secti<strong>on</strong> begins with a discussi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> the dataset that is used and the form <str<strong>on</strong>g>of</str<strong>on</strong>g> the model that is<br />

estimated, and then turns to the results <str<strong>on</strong>g>of</str<strong>on</strong>g> the analysis. Various alternative hed<strong>on</strong>ic models are<br />

discussed and estimated in Secti<strong>on</strong> 5, with Secti<strong>on</strong>s 6 and 7 providing a discussi<strong>on</strong> <str<strong>on</strong>g>of</str<strong>on</strong>g> and results<br />

from the repeat sales and sales volume models.<br />

4.1. Dataset<br />

<str<strong>on</strong>g>The</str<strong>on</strong>g> data used for the Base Model were described in Secti<strong>on</strong> 3.3. A key threshold questi<strong>on</strong> is<br />

whether or not to include the residential transacti<strong>on</strong>s that pre-date the relevant wind facility.<br />

Specifically, though the complete dataset c<strong>on</strong>sists <str<strong>on</strong>g>of</str<strong>on</strong>g> 7,459 residential transacti<strong>on</strong>s, a number <str<strong>on</strong>g>of</str<strong>on</strong>g><br />

these transacti<strong>on</strong>s (n = 2,522) occurred before the wind facility was c<strong>on</strong>structed. Should these<br />

homes which, at the time <str<strong>on</strong>g>of</str<strong>on</strong>g> sale, would not have had any view <str<strong>on</strong>g>of</str<strong>on</strong>g> or distance to the wind facility,<br />

be included? Two approaches could be applied to address this issue. First, pre-c<strong>on</strong>structi<strong>on</strong><br />

transacti<strong>on</strong>s could be included in the hed<strong>on</strong>ic model either as part <str<strong>on</strong>g>of</str<strong>on</strong>g> the reference category<br />

within which no wind-project property value impacts are assumed to exist, or instead by<br />

specifically identifying these pre-c<strong>on</strong>structi<strong>on</strong> transacti<strong>on</strong>s through an indicator variable. Sec<strong>on</strong>d,<br />

and alternatively, pre-c<strong>on</strong>structi<strong>on</strong> transacti<strong>on</strong>s could simply be excluded from the analysis<br />

altogether.<br />

For the purpose <str<strong>on</strong>g>of</str<strong>on</strong>g> the Base Model, the latter approach is used, therefore relying <strong>on</strong> <strong>on</strong>ly the<br />

post-c<strong>on</strong>structi<strong>on</strong> subset <str<strong>on</strong>g>of</str<strong>on</strong>g> 4,937 residential transacti<strong>on</strong>s. This approach, as compared to the<br />

others, results in somewhat more intuitive findings because all homes have a distance greater<br />

than zero and have a possibility <str<strong>on</strong>g>of</str<strong>on</strong>g> some view <str<strong>on</strong>g>of</str<strong>on</strong>g> the turbines. More importantly, this approach<br />

minimizes the chance <str<strong>on</strong>g>of</str<strong>on</strong>g> inaccuracies that may otherwise exist due to inflati<strong>on</strong> adjustment<br />

c<strong>on</strong>cerns or outdated home characteristics informati<strong>on</strong>. 50 N<strong>on</strong>etheless, to test for the<br />

implicati<strong>on</strong>s <str<strong>on</strong>g>of</str<strong>on</strong>g> this choice <str<strong>on</strong>g>of</str<strong>on</strong>g> datasets, alternative hed<strong>on</strong>ic models that use the full dataset were<br />

estimated, and are discussed in detail in Secti<strong>on</strong>s 5.3 and 5.4.<br />

50 Home characteristics were obtained as <str<strong>on</strong>g>of</str<strong>on</strong>g> the last property assessment. <str<strong>on</strong>g>The</str<strong>on</strong>g> timing <str<strong>on</strong>g>of</str<strong>on</strong>g> that assessment relative to<br />

the timing <str<strong>on</strong>g>of</str<strong>on</strong>g> the home sale transacti<strong>on</strong> dictates how representative the assessed home characteristics are <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

subject home when it was sold. For example, if a home sold early in the study period but subsequently had<br />

significant improvements made that are reflected in the current assessment data used in the analysis, the model<br />

would assign value to these home characteristics at the time <str<strong>on</strong>g>of</str<strong>on</strong>g> sale when, in fact, those characteristics were<br />

inaccurate. Additi<strong>on</strong>ally, the inflati<strong>on</strong> adjustment index used in this analysis to translate home values to real 1996<br />

dollars came from the nearest or more appropriate municipal statistical area (MSA). Many <str<strong>on</strong>g>of</str<strong>on</strong>g> the wind projects in<br />

the analysis are located in relatively rural parts <str<strong>on</strong>g>of</str<strong>on</strong>g> the country, and the housing market in the nearest metropolitan<br />

area could be different than the market surrounding wind projects. Although these areas have – in many instances –<br />

recently begun to attract home buyers willing to commute back to the metropolitan areas <strong>on</strong> which the index is<br />

based, the older index adjustments are likely less accurate than the more recent adjustments. Using a subset <str<strong>on</strong>g>of</str<strong>on</strong>g> the<br />

data for the majority <str<strong>on</strong>g>of</str<strong>on</strong>g> the analyses that removes the older, pre-c<strong>on</strong>structi<strong>on</strong>, homes minimizes both <str<strong>on</strong>g>of</str<strong>on</strong>g> these biases.<br />

23

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