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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This research examines the economic impacts of gas distribution pipeline incidents on residential property values across the United States from 2010 to 2020. The study focuses on diverse geographic regions across the nation and property types, analyzing incidents within a 1,000-meter radius of affected sites compared to a control group of properties located 1,000 to 2,000 meters away. Driven by concerns over aging pipeline infrastructure, which has led to over 12,308 incidents in the past two decades—averaging 650 annually, causing 306 fatalities, and incurring over $6 billion in damages, the study seeks to clarify inconsistent prior findings on how these incidents affect housing markets. It investigates how incident characteristics, such as high-visibility events like explosions or evacuations, amplify economic impacts and emphasizes the need for a nationwide evaluation to better understand the role of public awareness and risk disclosure in shaping property values.
The analysis employs a difference-in-differences (DID) approach, drawing on data from 864 pipeline incidents and approximately 17 million property transactions, with a focused examination of 219 incidents averaging 88 nearby housing transactions each. The methodology uses binscatter regressions to evaluate spatial and temporal effects, which persist for roughly 500 days after an incident. Key variables include housing prices, incident types (e.g., explosions, evacuations, or private versus public land settings), and a 540-day pre- and post-incident timeframe, with transactions grouped into 90-day intervals. Fixed effects and year trend controls address potential confounders, and the parallel trends assumption underpins the DID framework. Descriptive statistics confirm that housing characteristics are well-balanced across treatment and control groups, with standardized differences typically below 0.10, ensuring robust comparisons.
Pipeline incidents have a notable impact on nearby housing prices, reducing them by an average of 4% to 6%. A more precise model estimates a 6.1% decline within 90 days of an incident, which is statistically significant at the 5% level. This translates to substantial housing value losses over the decade, amounting to $10 billion to $14 billion, equivalent to 1.4% of total U.S. housing transactions in 2014, based on an average pre-incident home price of $175,728. Incidents with greater public attention, such as explosions (14.5% price drop), ignitions (8.3%), or evacuations (7.6%), cause more significant declines. Additionally, incidents on private land or involving above-ground pipelines compared to underground or public land events have a more substantial impact. Interestingly, incidents without fatalities or injuries have a larger impact (5.7%) than those with casualties (2.3%). While prices show partial recovery after 270 days, they remain below pre-incident levels, indicating lasting effects. Robustness checks, including triple-difference analyses, falsification tests, and propensity score matching, confirm these results. The study underscores the significant economic implications of pipeline safety policies and suggests future research on how different populations respond and how pipeline construction announcements affect property values.
Cheng, Nieyan, Minghao Li, Pengfei Liu, Qianfeng Luo, Chuan Tang, and Wendong Zhang. "Pipeline Incidents and Property Values." Journal of Environmental Economics and Management 127 (2024).