Printer Friendly

Impact of hazardous waste sites on property value and land use: tax assessors' appraisal.

Tens of thousands of abandoned and operating hazardous waste sites are expected to cost the United States $750 billion to remediate from 1990 to 2020.(1) More than 1,200 sites are considered sufficiently dangerous to be on the U.S. Environmental Protection Agency's (EPA) National Priority List (NPL) for cleanup. Approximately 2 million Americans live within a mile of one of these sites and one person in six lives within four miles.(2) The EPA and the Agency for Toxic Substances and Disease Registry (ATSDR) are charged with evaluating the health and environmental impact of hazardous waste sites. Risk assessment studies performed at such sites have proven inconclusive because of data and methods limitations.(3)

Economic impacts are feared because hazardous waste sites can stigmatize neighborhoods. For example, Bill Mundy identified seven criteria including disruption, site visibility, and poor prognosis for remediation that could lead to stigmatization and devaluation of property in "Stigma and Value."(4)

Economic impacts are difficult and costly to assess because an economic study typically requires analysis of every property transaction and data about the hazardous waste site as well as data about local taxes, school systems, and numerous other factors that influence property values. A typical economic analysis can easily cost over $100,000 and require months of research. In light of the political pressure to remediate sites, it would be extremely helpful if a process could be developed to quickly separate hazardous waste sites into those that clearly have affected property values, transactions, and land uses, and those that have not. The clearly affected group would be given priority for more detailed economic studies.

Local tax assessors are in a unique position to make an initial screening; that is, they are the professional group most capable of judging the importance of the factor of hazardous waste compared with the factors of taxes, community services, the business climate, and other characteristics that affect property values, transactions, and land uses. They are charged with the responsibility of assessing value for tax purposes. To properly appraise property, tax assessors must keep abreast of transactions and prices and integrate the information represented in hundreds of individual decisions on the part of property owners and buyers about taxes, school systems, and hazardous waste sites. The purpose of the research presented here is to examine the economic impacts of hazardous waste sites through the judgments of local tax assessors.

EXPECTATIONS ABOUT ECONOMIC IMPACTS

There are good reasons to expect hazardous waste sites to reduce property values and deter developments. Numerous national surveys show that the public perceives hazardous waste to be a major threat. The Roper December 1987 and January 1988 surveys for the U.S. EPA reported that 62% and 61% of respondents believed that active and inactive hazardous waste sites are "very serious" problems. Of 28 environmental and occupational issues, these two ranked first and second.(5) Other Roper surveys in 1989 and 1990 as well as Louis Harris polls in 1980 and 1990 confirm the public's aversion to hazardous waste sites.(6) In light of public perception and aversion it is reasonable to expect that people will avoid purchasing homes in proximity to hazardous waste sites, thus exerting a downward effect on values.

At the community level, William Freudenberg asked 100 community groups to rank environmental hazards. Toxic waste dumps were the hazard most often at the top of the list.(7) Michael Edelstein argues that hazardous waste sites can destroy communities. Residents, he says, become chronically depressed, do not allow their children to play in the street, lose faith in their elected officials, worry about the loss of property values, and hope that their homes will burn down so that they can move.(8) Jay Gould was so convinced that hazardous waste sites are detrimental that he classified the quality of life of tens of thousands of zip code areas in the United States on the basis of what he considers to be toxic waste proximity.(9)

Some economic studies support public perception. Gary McClelland, William Schulze, and Brian Hurd; Gregory Michaels and Kerry Smith; and John Hoehn, Mark Berger, and Glenn Blomquist found proximity to toxic sites lowers property values while remediation of such sites increases property values.(10)

There are reasons, however, to expect that not every hazardous waste site will lower property values. One reason is special community circumstances. For example, Anthony Mason studied three communities in New Jersey that are literally surrounded by what normally would be considered noxious facilities. One community is bordered by petroleum tank farms and a small airport on one side, a major highway on a second side, and chemical plants and a chemical landfill on the third and fourth sides. Yet the largely elderly population is satisfied with their location because it protects them from outsiders. In essence, the hazards are a protective moat.(11) Consistent with Mason's results, Milton Russell and colleagues at the University of Tennessee studied ten communities near Superfund sites. While some were adamant about rapid and total cleanup, others were not. The authors suggest that the special circumstances of every site must be understood to comprehend the public reaction.(12)

A second condition that mitigates against economic impacts is the presence of resident populations with limited choices. The United Church of Christ study of hazardous waste sites by zip code areas found that minority population and low socioeconomic status were the two best correlates of the location of hazardous waste sites.(13) People who have limited choices because of racial and economic segregation may not be able to act on their perceptions. Consequently, housing values may not decrease much when a site is identified or appreciate much when it is remediated.

Some sites may not affect property values because they are isolated and uncontroversial. For example, Andrejs Skaburskis found a small percent decrease in sale prices near an inactive, uncontroversial landfill. For these kinds of cases, he argued, it should not be difficult to implement compensation plans or to control negative impacts.(14)

In sum, while it is generally assumed that hazardous waste sites reduce property values, existing published studies are not conclusive. Further, such studies do not routinely investigate other important effects such as the impact of hazardous waste sites on the frequency of real estate transactions as well as on existing and planned land uses and activities. A typical parcel-by-parcel study of changes in property values and a psychometric analysis of property owners' perceptions of impacts require an enormous amount of time, personnel, and monetary resources. While the results of such studies are certainly reliable, they may be too costly and take too long to be feasible for appraisal purposes.

This effort to use the judgments of local tax assessors is a followup of a study that attempted to isolate major factors that confound the negative impact of hazardous waste sites on property values.(15) The initial research studied changes of housing sale prices during the period from 1975 to 1988 in 77 towns in New Jersey near hazardous waste Superfund sites. New Jersey is an ideal place to conduct this research because it has more Superfund sites than any other state and maintains a central file of all housing sales. The study found that only communities with populations less than 10,000 or in regions undergoing rapid price increases had statistically significant lower increases in sale prices. For other towns in proximity to such sites, an impact at the community level was not obvious. In addition, the hazard ranking of a particular site calculated by the EPA's hazard-ranking system did not appear to influence sale prices.

Though a useful initial step, the first study had a major geographical scale limitation. Superfund sites may have neighborhood impact without having town, city, or borough-wide impact. In other words, impacts may exist that aggregated town data cannot show. The study presented here emerged from the need to focus on the neighborhood surrounding a site as well as the need to be able to evaluate the relative importance of a hazardous waste site compared with other factors that influence land value, transactions, and land use.

METHODS

A two-page survey containing six questions was mailed to the tax assessor of each of New Jersey's 567 minor civil divisions (e.g., boroughs, cities, townships) for which the U.S. Bureau of the Census collects data. For purposes of this article, they are called towns. After defining a hazardous waste site, the first question asked whether a town has or had a hazardous waste site. In towns with multiple sites, assessors were asked to focus on the one with the greatest impact on property values. Using the entire jurisdiction as a basis of comparison, those who responded affirmatively to the first question were asked to indicate whether the hazardous waste site caused property values to change within one-fourth mile of the site (excluding the impact on the site itself), within one fourth mile to one mile, and within one mile to three miles. A four point scale was used:

* 1 = lowered property values a good deal (more than 25%) * 2 = lowered property values somewhat (5% - 25%) * 3 = no effect on values * 4 = increased values

An option for expressing uncertainty was also provided. Using the same format, the second part of question 2 asked for similar judgments about real estate transactions.

Question 3 concerned whether existing land uses or activities were harmed when a site was identified, and if so, how they were harmed. Tax assessors were then asked whether a site deterred any new land uses or activities in their jurisdictions, and those who responded affirmatively were asked to provide details.

Question 5 concerned whether a facility had caused the community to change its land-use plans for housing, commerce, industry, recreation, schools, and other public facilities, and if so, what these changes involved. In question 6, respondents were asked to rate the relative importance of 14 factors with the potential to constrain the appreciation of property values in their jurisdictions during the last five years. The 14 factors included:

* Economic recession

* Decline of local industry, agriculture, and commerce

* Remote location without a major highway linkage

* Fully developed area

* State and local planning and environmental policies

* Adjacent areas are more attractive and local services are inferior

* High taxes

* Presence of hazardous waste site

Assessors responsible for towns. with hazardous waste sites were asked to answer the sixth question for the mile surrounding the site as well as the entire town. This question provided the opportunity to judge the relative importance of hazardous waste sites and the other 13 factors in towns with such sites. Our hypothesis was that some factors (e.g., economic recession, high taxes) would be important in every town, including towns with hazardous waste sites. On the other hand, hazardous waste sites clearly would only be significant in towns with sites, and especially within one mile of the site.

Responses from towns without sites were used as a statistical control; that is, average scores for question 6 were calculated and t-tests were performed to determine whether towns with sites had a higher mean for the hazardous waste variable than towns without sites. The 14 constraints in towns with sites and in towns without them were also ranked and the results were correlated to determine the consistency of the factors in each group of towns.

RESULTS

A total of 200 surveys were returned (35% of 567) within six weeks of the February 28, 1992, mailing. Fifty were not useful because of inadequate responses. Some tax assessors responded that they did not feel competent to answer question 6 while others indicated that their towns did not have sites and therefore they could not respond to question 6. A total of 150 useful responses were received. The 26% response rate is higher than expected for most mail surveys.(16)

A good response rate was necessary from the 90 towns that were known to have at least one site on the EPA NPL. In fact, 41% replied (37 of 90). The response rate for towns without Superfund sites was 24% (113 of 477). Nineteen of the 113 without NPL sites indicated that their towns have sites. These included those overseen by the state Superfund program; by the federal RCRA program, which manages active hazardous waste sites; and by the state ECRA program, which requires certification that a site is not contaminated before property can be sold or transferred. Overall, 56 of the 150 respondents' towns have hazardous waste sites while 94 do not.

Table 1 shows that 16 respondents (28%) judged that property values within one-fourth mile of the site were lowered as a result of the hazardous waste site. Five (9%) believed an impact could be observed one-fourth mile to one mile from the site, and only one respondent believed that an impact on property values existed more than one mile away from the site.

The same attenuation of impact with distance was apparent when real estate transactions were considered. Twenty-one percent judged that a negative impact existed within one-fourth mile of the site, 9% at a distance of one-fourth mile to one mile, and 4% at a distance of one mile to three miles. Table 2 shows that new land uses or activities were deterred in 23% of towns, existing land uses or activities were harmed in 16%, and plans were disrupted in less than 10%.

One reaction to these numbers is TABULAR DATA OMITTED TABULAR DATA OMITTED to conclude that the claims that sites severely damage property have been exaggerated. Approximately three-fourths of the respondents saw no impact. Yet the responses of the 16 tax assessors in affected towns show that substantial impacts often occurred within one-fourth mile of the site. Some of the tax assessors' responses were:

* We lost a new industrial building near the site. They located in another state, which cost |us~ jobs and tax ratable.

* Property owners could not sell and values were down within a mile of the site, no new housing has been built. A nearby recreation area closed because of stream contamination.

* No one wants to build in our area because we are next to |the site~.

* We waited two years for a site to be cleaned up. A $17 million project was delayed two years.

* The |site~ scared buyers away. Resale of adjacent properties |has been~ reduced and |there has been~ a significant increase in time to sell and lowering of values. New housing in adjacent areas stopped.

* A high school was proposed for a site nearby--but was deemed to be too close to |the site~.

* A housing development was abandoned after contamination was found in an adjacent stream.

* |It~ had a drastic impact. No one that I know of would build anything in this area nor would they move into the area. The residents that are there have been there for many, many years and they are all related.

In contrast, other tax assessors' comments suggest that a remote location and the stagnant economy mitigated against impacts in many towns. For example:

* The surrounding area is not conducive to housing anyway.

* The site is not generally known and is remote from the general public.

* The site is on federal land.

* I have been surprised that homes in the area have continued to sell, although no recent sales have occurred, which I would attribute to the overall economy.

Some tax assessors indicated that there has been no impact during the last five years because the causes of such effects have been corrected.

* Existing land uses were hampered for a time. But contaminated wells were replaced by city water, which had been planned anyway. |The site is~ no longer a problem.

* The site is cleaned up, and all is back to normal.

Several tax assessors provided anecdotes to support the contention of the majority that hazardous waste sites had not impeded property appreciation or development.

* A new development started within a mile of the site.

* Major new developments and a new school were built within one-half mile of the site.

* One housing development was abandoned, but we have 30% of |the~ county's new construction.

Table 3 shows the relative importance of hazardous waste sites as constraints on the appreciation of property values. In the 94 towns without sites, hazardous waste was the least important constraint (averaging 2.35 on a scale of 1 to 9). The average values for the factors of economic recession, state environmental regulations, high taxes, local and state planning policies, adjacent areas being seen as more attractive, and commercial and industrial decline were significantly higher (P |is less than or equal to~ 0.05).

Forty town assessors reported having hazardous sites in their communities that had no impact on property values. The average for the hazardous waste variable was 1.94, or 13th out of 14. The same TABULAR DATA OMITTED eight other variables had statistically significant higher average importance values. Within a mile of the hazardous waste site in these 40 towns, the average was 2.75, or 10th of 14 variables. Only state environmental regulations, the economic recession, high taxes, and local planning policies were statistically significantly more important.

In the 16 towns identified by their assessors as affected, the average importance scale for hazardous waste sites was 3.13 in the towns as a whole and 4.33 within a mile surrounding the site. Only state environmental regulations, the economic recession, and high taxes were considered more important by the assessors within the inner mile, and while hazardous waste ranked only ninth in the towns as a whole, none of the higher ranked causes had significantly higher average scale values.

Table 3 illustrates the consistent importance of the economic recession, state environmental regulations (e.g., coastal zone, water connections, wetlands), and high taxes. The Spearman rank correlations between the 14 importance variables in the 94 towns without hazardous waste sites and the 40 towns with sites and no impact was 0.90. The same correlation was 0.89 between the 94 towns without sites and the inner mile surrounding the site in these 40 towns; 0.82 between the 16 towns with sites that caused impacts and the 94 towns without sites; and 0.63 between the inner mile in those 16 towns with sites and the 94 towns without sites. All of these correlations were significant at P |is less than or equal to~ 0.01.

The tax assessors' judgments were compared with housing value data for the period from 1985 to 1988 developed from the previous New Jersey study.(17) The focus was 37 towns on the EPA's priority NPL Superfund list. During the period from 1985 to 1988, the average increase in the value of houses sold in the 13 towns affected by a hazardous waste site was 60.8% compared with 61.7% in the 24 towns not affected. These relative changes can be misleading, however, because of variations in regional housing markets. That is, national and regional factors such as the economic recession, state land use and environmental regulations, and taxes can mask local factors like hazardous waste sites. Regional variations were controlled for by subtracting the town percent change from the percent change in the host county. The net housing value appreciation in the affected communities was 2.69% compared with 1.47% for those not affected. Although the difference of means (1.22, 95% confidence limits of -17.1 to 14.7) was not statistically significant at P |is less than or equal to~ 0.05, it was in the direction expected.

Previous research had shown that nearly all the Superfund sites were identified from 1980 to 1985, and in fact the major impact on property values tended to be from 1980 to 1985. Net housing sale values were calculated for the 37 towns for the period from 1980 to 1985 and subtracted from those for the years 1985 to 1988. Housing sale prices should have rebounded more in the 24 unaffected towns than in the 13 affected ones, and they did. The net average difference between the 1985-1988 and the 1980-1985 housing sale values was 14.9% in the 24 unaffected towns and only 6.6% in the 13 affected towns. The net difference, 8.3% (95% confidence limits were -16 to 32.6), was not statistically significant at P |is less than or equal to~ 0.05, but again was in the expected direction.

CONCLUSION

Tax assessors report that hazardous waste sites have lowered the appreciation of property values, deterred land uses, and affected community plans in about 15% to 20% of the New Jersey towns that report hazardous waste sites. Nearly all of these impacts occur within one-fourth mile of the site. Many town assessors reported no impact because the site is located in a remote location, the problem was slight, or the problem has been solved. In addition, other factors, notably the economic recession, state and local planning and environmental policies, and high taxes are more important or equally important in determining land values.

Three considerations make us cautious about these results. First, results for New Jersey may not be generalizable to the entire United States. New Jersey's population is particularly aware of hazardous waste problems, which is demonstrated by the fact that it is generally recognized as having the strongest hazardous waste management programs in the United States.(18) In other words, New Jersey's citizens may be more sensitive to hazardous waste than the residents of most other areas. Nonetheless, these broad conclusions may be relevant for other states: 1) the existence of a hazardous waste site does not necessarily mean it has a major impact on values; and 2) if there is an impact, it is usually close and specific to the site.

Second, New Jersey experienced a housing price surge from 1980 to 1988, with prices increasing by about 145%. But the postboom period produced a dramatic correction. Has the stagnant economy become such an overriding factor that the full property-value and land use consequences of hazardous waste sites are understated in New Jersey at this time? Replication of this study design is needed in different regions of the United States. Third, while this survey approach is a quick and relatively inexpensive way to obtain data on many communities, it cannot replace detailed price estimation and psychometric studies. Based on the results of this study, however, tax assessor judgments can be used to determine which communities may require further in-depth analyses.

Michael Greenberg, PhD, is professor of urban studies and community health at Rutgers University. Mr. Greenberg is also director of the Policy Division of the NSF-Hazardous Substances Management Research Center as well as being a member of the National Research Council Committee on Remedial Action Priorities for Hazardous Waste Sites. He received a PhD from Columbia University.

James Hughes, PhD, is professor of urban planning and policy development at Rutgers University. Mr. Hughes received a PhD from Rutgers University and is director of the Rutgers Regional Report. He has conducted extensive housing and demographic research.

1. Milton Russell, E. William Colglazier, and Mary English, Hazardous Waste Remediation: The Task Ahead (Knoxville, Tenn.: Waste Management Research and Education Institute, 1991).

2. "Hazardous Waste Sites: Priority Health Conditions and Research Strategies--United States," MMWR, v. 41, no. 5 (1992): 72-74; National Research Council, Environmental Epidemiology, v. 1, Public Health and Hazardous Waste (Washington, D.C.: National Academy Press, 1991).

3. Ibid.

4. Bill Mundy, "Stigma and Value," The Appraisal Journal (January 1992): 7-13.

5. Roper Organization, Roper Reports (New York: The Roper Organization, 1987-1990).

6. Louis Harris and Associates, The ABC-Harris Survey (New York: The Harris Organization, 1980); and "Public Mood Has Hardened to Advocate Tougher, Stricter Laws on Air Pollution," The Harris Poll (April 1, 1990).

7. William Freudenberg, "Citizen Action for Environmental Health: Report on a Survey of Community Organizations," American Journal of Public Health. v. 74 (1984): 444-448.

8. Michael Edelstein, Contaminated Communities: The Social and Psychological Impacts of Residential Toxic Exposure (Boulder, Colorado: Westview Press, 1988).

9. Jay Gould, Quality of Life in American Neighborhoods, Levels of Affluence, Toxic Waste and Cancer Mortality in Residential Zip Code Areas (Boulder, Colorado: Westview Press, 1986).

10. Gary McClelland, William Schulze, and Brian Hurd, "The Effect of Risk Beliefs on Property Values: A Case Study of a Hazardous Waste Site," Risk Analysis, v. 10 (1990): 485-497; Gregory Michaels and V. Kerry Smith, "Market Segmentation and Valuing Amenities with Hedonic Models: The Case of Hazardous Waste Sites," Journal of Urban Economics, v. 28 (1990): 223-242; and John Hoehn, Mark Berger, and Glenn Blomquist, "A Hedonic Model of Interregional Wages, Rents, and Amenity Values," Journal of Regional Science, v. 27 (1987): 605-620.

11. Anthony Mason, Risk Perception in Communities on the Industrial Margin (New Brunswick, N.J.: Rutgers University Department of Geography, PhD thesis, 1989).

12. Russell, Colglazier, and English.

13. United Church of Christ, Commission for Racial Justice, Toxic Waste and Race in the United States (New York: United Church of Christ, 1987).

14.Andrejs Skaburskis, "Impact Attenuation in Conflict Situations: The Price Effects of Nuisance Land Use," Environment and Planning A, v. 21 (1989): 375-383.

15. Michael Greenberg and James Hughes, "The Impact of Hazardous Waste Superfund Sites on the Value of Houses Sold in New Jersey," Annals of Regional Science, v. 26 (1992): 147-153.

16. J. Wanzer Drane, "Imputing Nonresponses to Mail-Back Questionnaires," American Journal of Epidemiology, v. 134 (1991): 908-912.

17. Greenberg and Hughes, 147-153.

18. Bob Hall and Mary L. Kerr, 1991-1992 Green Index (Washington, D.C.: Island Press, 1991).
COPYRIGHT 1993 The Appraisal Institute
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Author:Greenberg, Michael; Hughes, James
Publication:Appraisal Journal
Date:Jan 1, 1993
Words:4256
Previous Article:Issues in the valuation of contaminated property.
Next Article:Market value and public value: an exploratory essay.
Topics:


Related Articles
The impact of hazardous materials on property value.
Understanding the unique aspects of hotel property tax valuation.
Analyzing the property tax expense.
Stigma, environmental risk and property value: 10 critical inquiries.
Seeking equity in the ad valorem taxation of anchor department stores.
How Australian Appraisers Assess Contaminated Land.
The role of the real estate appraiser and assessor in valuing real property for ad valorem assessment purposes. (Notes and Issues).
Neighborhood stigma twenty years later: revisiting superfund sites in suburban New Jersey.
Evaluating the potential impact of a proposed landfill.

Terms of use | Copyright © 2016 Farlex, Inc. | Feedback | For webmasters