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What Does the Evidence Say About NPL Listing and Home Prices?
Challenges in Applying Property Value Studies to Assess the Benefits of the Superfund Program
Property Value Report (PDF) (35 pp, 215 KB, About PDF )Executive Summary
This report discusses the theory and applicability of hedonic valuation, and reviews the challenges inherent in applying available property value studies to assess the benefits of the Superfund program. In doing so, the report also provides a literature review of the research into changes in residential property value associated with hazardous substance contamination at Superfund sites. A few studies on property values associated with general hazardous waste were also considered. Although the existing Superfund literature focuses specifically on National Priorities List (NPL) sites, this report discusses both NPL and non-NPL sites in the Superfund program.
The literature review yielded the following findings:
- Many studies find that NPL sites have an impact on surrounding residential property values, but the impacts found vary in size and direction.
- Information on timing and attribution of price effects is unclear and not the question most of the existing studies investigated.
- In cases where homes near an NPL site experience a decline in price associated with site proximity, there is some evidence that there may be a reversal of the decline after the site is listed and before the remedial action is complete.
- The existing literature does not provide enough information to estimate the benefits of the Superfund program as a whole nor to estimate the benefits of the NPL.
Existing studies (with a few exceptions) rely on data that do not isolate individual actions along a site’s timeline that could cause the evaluated price effect. The studies usually identify a single key event, that varies from study to study, and look at price effects before and after that one event. Most studies do not distinguish among the full set of events associated with an NPL cleanup; for example whether price information was collected at a time when contamination had just been discovered; the site was listed on the NPL; or Superfund assessment and cleanup activities were underway or completed. This and other factors which we will explain below suggest that the studies are ill-fitted to the task of identifying causal linkages between the price effects they evaluate and the impact of the Superfund program as a whole. One study (Greenstone and Gallagher 2008) uses an approach which avoids this problem, but it relies on self-reported, geographically coarse data (as opposed to the observed sale prices used in other studies). Two studies that carefully distinguish between different events at an NPL site (Kiel and Zabel 2001, Kiel and Williams 2007) found that: (1) in many cases, discovery of contamination caused an initial decline in nearby residential property values; and (2) activities undertaken by the Superfund program had varying effects on property values. In general, there is a lack of consideration of the series of events associated with hazardous waste contamination and cleanup in the available literature, and evidence linking price effects and Superfund is mixed.
The lack of comprehensive consideration of the series of events associated with hazardous waste contamination and cleanup in a way that provides an understanding of the timing and causation of property price effects limits the usefulness of hedonic pricing studies of property for drawing conclusions about the benefits of the Superfund program. The existing property value studies of the Superfund program provide insights into the effects of NPL sites on property values, but due to the lack of consideration of individual events and timelines, are inadequate for an overall evaluation of the Superfund program. To assist analysts seeking to assess land cleanup and reuse activities, EPA is currently drafting the Handbook on the Benefits, Costs, and Impacts of Land Cleanup and Reuse which will include guidance on hedonic analysis.