From Here to There (Part II): Transmission Lines and Property Values

THE TRANSMISSION CHALLENGE

In my last post I talked about the importance of high-voltage overhead transmission lines in the new renewable energy landscape. Transmission is one of the greatest challenges facing wind and solar power in the United States and Europe. Getting newly generated energy to the end consumer requires updating existing lines and developing new transmission line projects, but siting new projects can be a long and difficult process. Studies also show that people support renewable energy generation in theory, but do not want transmission corridors near their homes. States find themselves committed to renewable energy generation goals and capable of generating plenty of renewable energy, yet energy companies face local opposition in transmitting this energy to consumers. A common concern expressed by property owners is that visible transmission lines may have a negative impact on property value. In this post I’d like to present some of the scholarly literature since 2010 that addresses this question.

THE LITERATURE BEFORE 2010

The research on powerline impacts on property values has been around since the 1960s. It generally breaks down into three categories—large-scale statistical price studies, survey-based research, and more traditional appraisal methods, such as paired sales and resale analyses. Statistical studies of property value diminution due to power lines are generally hedonic price models that attempt to isolate the effects of powerlines from the effects of other property characteristics. Survey studies primarily consist of contingent valuation experiments in which subjects are asked to choose alternative scenarios to elicit their preferences for environmental amenities and other non-market goods.  In 2010, Thomas O. Jackson and Jennifer Pitts reviewed the literature and observed that price effects, if any were observed, ranged from 2% to 9% and that these effects decreased with distance and time. Any price effects were found to be primarily attributable to the visual impact of the lines and supporting steel pylons.

THE LITERATURE AFTER 2010

So what has been happened since Jackson and Pitt’s 2010 review in the survey-based research, statistical research, and more traditional appraisal methods? The short answer is that not much has happened in the past five years—or twenty-five years for that matter. The long answer is that there have been some minor shifts in methodology and focus, but the conclusions have generally remained consistent with the pre-2010 literature.

STATISTICAL STUDIES

Though researchers continue to produce hedonic studies, their methodology and conclusions have remained more or less the same. Since 2010, there have been several studies outside the U.S. and Canada, specifically in the UK, Australia, and New Zealand. This is important because transmission corridors differ from one country to the next, so that applying results of a U.S. price study to a location outside the U.S. may be misleading. In New Zealand, for example, pylons may be placed directly on a private lot. Since 2010, the studies that distinguished between the pylons and the lines themselves in their hedonic models found that if any impact was observed it was largely due to the pylons, not the lines themselves. One 2013 paper by Steven Bottemiller and Marvin Wolverton, published in the Appraisal Journal, found that when the distinction between high-end and mid-priced homes was considered in a study of Seattle homes abutting transmission lines, any negative effects were far greater for luxury homes. Though researchers have for decades found that any effects are usually attributable to the visual impact of powerlines, most statistical studies continue measuring the price impacts of powerlines based solely on a proximity variable rather than any view variables. It is of course much easier to calculate distance, since views are affected by vegetation and topography. However, in the hedonic literature specific to the price impact of impaired viewsheds, there have been some interesting developments recently. Researchers have been using 3D GIS datasets that allow them to calculate the viewsheds of each and every property in a dataset. Hopefully we start seeing more of this sophisticated methodology in the transmission line literature. The conclusions of the literature since 2010 show that powerlines have small or negligible impacts on nearby property values. Any impacts that are observed are largely attributable to the supporting pylons, not the lines themselves, and these impacts are generally due to the visual impact of the pylons. Some studies find positive price impacts because of the increased privacy—one fewer neighbor—and recreational value afforded by transmission line corridors.

SURVEY-BASED RESEARCH

If not much has happened in the statistical literature, there has been even less activity in the survey-based literature specific to transmission lines. Several studies have measured the benefits of removing or undergrounding transmission lines, and conclusions here have also remained consistent. People express a general approval of green energy generation, but do not like seeing transmission lines in their backyards. They often express a strong preference for undergrounding, but when willingness-to-pay is measured, few are willing to pay the higher costs of undergrounding transmission lines.

APPRAISAL METHODS

Few scholars have turned to traditional appraisal methods as an alternative to hedonic studies or contingent valuation experiments. The trend in the literature is to either improve the existing hedonic models or to get away from transactional data altogether and rely on survey-based contingent valuation. If their appraisal methods are used, they are generally combined with a hedonic regression model. However, hedonic regressions require large and rich datasets, so they are most suited for densely populated areas. In a 2012 study published in the Appraisal Journal, Chalmers conducted a case study analysis of rural properties in Montana. The study found that strictly recreational properties and agricultural properties showed little to no price effects. The larger a property, the smaller the effect. The more unique a property, the smaller the effect.

OTHER OBSERVATIONS

A broad review of the literature shows that much of the activity has been going on in “softer” sociological studies on the public perception of powerlines. These papers have generally been concerned with examining how locals view powerlines, why they feel that way, and how policymakers and energy companies can work with or improve the local perception of powerline projects. Much of this literature emphasizes the importance of new powerline projects in the shift to renewable energy generation. Research consistently finds that green energy generation is perceived positively by the public, while its physical manifestations—especially turbines and transmission lines—are often viewed negatively. If more people see high-voltage transmission lines as a necessary part of a green energy future, perhaps their perception of them would change. A review of property value diminution and disamenity literature in general reveals that much of the research activity has shifted to studies of wind power and the impact of wind farms on property values. However, as already mentioned, some of the most interesting statistical studies in the past five years have come out of the research on views and their impact on property values.

FINAL THOUGHTS

It always takes time for the research to catch up. Hopefully, the renewed interest in transmission lines as “green energy superhighways” will breathe new life into the literature on the effects of powerlines on property values. As somebody who has appraised many properties located adjacent to powerlines, my prediction is that the basic conclusions will not change. However, it would be beneficial to all those in the field to see studies with more rigorous and subtle treatment of view effects and studies specifically measuring the effects of underground transmission lines (rather than distribution lines) on property values.

What would you like to see? What is your view of the literature so far?