Real estate research provides evidence that properties potentially exposed to perceived or actual risks may experience price impacts. Looking Under the Hood reviews publications that illustrate the theoretical, methodological, and data challenges faced by scholars and practitioners studying detrimental conditions and their impacts on property values.
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Appraisals of proximity damages in right-of-way projects often incur significant resources from agencies and property owners, leading to disputes and litigation concerning compensation. Appraisers play a crucial role, but the estimates appraisers provide can differ significantly. Consequently, appraisers commonly rely on proxy data such as paired sales or published studies to estimate damages, extrapolating findings from similar properties rather than considering specific geographic characteristics. The authors, Tatos et al. [1], advocate for a more rigorous methodology involving separate proximity impacts to overcome these challenges. This revised approach emphasizes the need for comprehensive data sets and advanced analytical models integrating expertise from various fields, including geography, to ensure credible and accurate results.
In a comprehensive study in Salt Lake County, Utah, researchers analyzed the impact of electrical transmission corridors on single-family home values, focusing on geographic nuances often overlooked in previous assessments. By utilizing a vast dataset covering nearly all single-family home transactions from 2001 to 2014, including detailed transmission line location data, the study considered over 127,000 home transactions and 450 explanatory variables. This extensive dataset allowed for a more nuanced examination of proximity impacts, particularly concerning different types of transmission lines and their effects on property values at varying distances.
The study conducted for the 345 kV line found no decrease in property values at varying proximity ranges. The effect remained positive and stable at 0.90% for proximities ranging from 100 to 400 meters. However, these effects were not statistically significant, with p-values ranging from 0.0753 to 0.2702. For the 138 kV line, the study revealed a significant negative impact on property values across various proximity ranges. At 50 meters proximity, the effect was the most pronounced, with a decrease of 5.10% in property values, supported by a p-value of 0.0001, indicating high statistical significance. As the distance increased, the effect attenuated but remained substantial, with effects ranging from -2.90% to -1.10% across different proximity intervals, all supported by p-values of 0.0001, suggesting strong statistical significance throughout. For the 46 kV line, the analysis indicated mixed effects on property values based on proximity. At 50 meters of proximity, there was a negligible decrease of -0.05% in property values, supported by a p-value of 0.04055, indicating statistical significance. However, as the distance increased to 50-100 meters, the effect became more pronounced, showing a decrease of -2.50% in property values, with a highly significant p-value of 0.0001. Similar negative effects were observed in the 100-200 meters range, with a decrease of -0.90% and a significant p-value of 0.0001. Notably, as the distance extended beyond 200 meters, the effect reversed, showing a slight increase in property values of 0.20% and 0.30% for the 200-300 meters and 300-400 meters ranges, respectively. However, these effects were not statistically significant, with p-values of 0.3364 and 0.1142, respectively. For the substation, the analysis revealed varying effects on property values based on proximity. At 50 meters proximity, there was a notable decrease of -2.90% in property values, although the statistical significance was marginal with a p-value of 0.0613. However, in the 50-100 meters range, the effect was less pronounced, showing a decrease of -0.40% in property values, but with a p-value of 0.8455, indicating that this result was not statistically significant.
The study's findings underscore significant effects on property values attributed to proximity to certain types of electrical transmission lines, which can vary based on geographic location. Notably, homes near 138 kV and 46 kV lines experienced statistically significant decreases in value, while those near 345 kV lines exhibited no negative impact and, in some cases, even showed a slight positive effect. These findings are crucial for all parties involved in right-of-way projects, as they provide valuable insights into the potential impacts on property values.
[1] Tatos, Ted, Troy Lunt, SR/WA, MAI, and Mark Glick. "A Closer Look at Proximity Damages: When a Percentage Point Can Represent Millions of Dollars, Yielding Credible Results Is in Everyone’s Best Interest." Right of Way Magazine, March/April 2016.