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Duke study: Fracking lowers home values by $30K

Duke study: Fracking lowers home values by $30K

Fracking can significantly decrease home values, especially in areas that use well water, according to a new study from Duke University.

The study, which was done in Pennsylvania, found that home values decreased by an average of more than $30,000 for homes on well water within about a mile of shale drilling.

Homes on piped water decreased by a smaller margin – about $4,800 on average, according to the study.

“Our results show clearly that housing markets are responding to homeowners’ concerns about groundwater contamination from shale gas development,” said Christopher Timmins, a Duke economics professor who specializes in environmental economics, and lead author in the study. “We may not know for many years whether these concerns are valid or not. However, they are creating a real cost to property owners today.”

Hydraulic fracturing, or “fracking,” is a relatively new technology to extract gas from the earth by drilling into a shale formation and then applying a high-pressure mixture of water, sand and chemicals to create cracks that release gas. The N.C. General Assembly made moves to allow for fracking in North Carolina, though it has not happened yet in the state. The use of fracking is expanding across the nation.
According to Duke, the research is among the first to correlate fracking with property values. It appears online in the December issue of the American Economic Review. The researchers looked at home sales in 36 counties between 1995 and 2012 and controlled for potentially variables like effects of the Great Recession and the benefits homeowners could receive in the form of lease payments.

The authors found that a home’s distance from a shale well made all the difference. Among homes that rely on well water, a shale well located within one kilometer was associated with a 13.9 percent average decrease in home values. But if the nearest shale gas drilling site was at least two kilometers away, property values remained constant.

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Jason deBruyn covers the biopharmaceutical and health care industries. Follow him on Twitter @TriBizHealth or @jasondebruyn.

Source: Bizjournals.com Dec 15, 2015, 8:06am EST

By: Jason deBruyn Staff Writer  Triangle Business Journal

LINK: http://www.bizjournals.com/triangle/news/2015/12/15/duke-study-fracking-lowers-home-values-by-30.html?ana=twt

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The American Economic Review – December 2015

LINK: https://www.aeaweb.org/articles.php?doi=10.1257/aer.20140079

Abstract:Using data from Pennsylvania and an array of empirical techniques to control for confounding factors, we recover hedonic estimates of property value impacts from nearby shale gas development that vary with water source, well productivity, and visibility. Results indicate large negative impacts on nearby groundwater-dependent homes, while piped-water-dependent homes exhibit smaller positive impacts, suggesting benefits from lease payments. Results have implications for the debate over regulation of shale gas development. (JEL L71, Q35, Q53, R31)

 

Full Text LINK: http://pubs.aeaweb.org/doi/pdfplus/10.1257/aer.20140079

 

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