Looking Under the Hood 6.9– A Study of Shale Gas Development Moratorium Impacts on Housing Prices in Pennsylvania and New York

Real estate pricing 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.

Boslett and Guilfoos[1] conducted a hedonic analysis in which they studied the impacts of shale gas development on residential property values in Pennsylvania and New York. The study was unique because the authors elected to compare property values between two regions on either side of the Pennsylvania and New York border. It is important to note that shale gas development has been historically allowed in Pennsylvania, while New York has not allowed such development. The author’s hedonic study focused on the before and after impacts of a statewide moratorium on shale gas development. The model specification was chosen because the appreciation rates of both areas were similar before the announcement. Boslett and Guilfoos noted that shale gas development can have several potential benefits and costs. Some of the benefits included lease signing bonuses, royalty payments, and employment. While some of the potential negative externalities from shale gas development including health, optics, and noise impacts.

The regression study included 4,976 observations that spanned January 2006 through December 2012. This dataset included single-family residential and mobile home transactions with private water wells. The source of the transactional data was the county property assessment office and New York’s Office of Real Property Tax Services. The source of the environmental data was Pennsylvania’s Department of Environmental Protection and New York’s Department of Taxation and Finance. The authors chose to utilize a difference in differences model specification with sales in New York as the test area and transactions in Pennsylvania as the control area. No PVD was found due to proximity to any shale gas development in Pennsylvania.

The authors found that properties located in New York experienced a property value diminution (PVD) of 23.1% due to the moratorium, or a capitalized negative impact for each property of $25,531. They concluded that the total price impacts due to the moratorium experienced by the three counties in New York were $354 million over six years. 

[1] Boslett, Andrew, Todd Guilfoos, and Corey Lang. “Valuation of Expectations: A Hedonic Study of Shale Gas Development and New York’s Moratorium.” Journal of Environmental Economics and Management 77 (2016): 14–30.