Towers, Turbines and Transmission Lines

Impacts On Property Value

Sandy Bond, Sally Sims, Peter Dent

• Publisher: Wiley-Blackwell
• Year: 2013
• Print ISBN: 9781444330076
• eBook ISBN: 9781118533239
• Edition: 1
• Topic: Business
• Subtopic: Real Estate
• Index: Business

From the Foreword by Dr Valmond Ghyoot, Emeritus Professor of Real Estate, University of South Africa:

'The valuation profession, the legal profession, property industry participants in general and students will welcome publication of this book. Investors, environmental groups and affected property owners will find essential information for use in their decision-making, development objections and claims. My hope is that [it] will provide answers where required and that it will help to improve the professional standard of valuations and appraisals internationally. I trust that it will also raise the standard of testimony in damages cases. If so, the editors and contributors will have succeeded in documenting the state of the art in this relatively unexplored terrain.'

As a reference source, this book will help quantify the negative impacts on property values of high voltage overhead transmission lines, cell phone towers, and wind turbines. It gives a modern perspective of the concerns property owners have about the siting of industrial structures used to transmit or generate various forms of energy and how these concerns impact on property values.

Studies reveal concerns the public have about devices and structures that emit electromagnetic fields (EMFs) due to their potential health hazards. . Despite some research reports suggesting there are no potential adverse health hazards from high voltage overhead transmission lines (HVOTLs) and towers, there is still on-going concern about the siting of these structures due to fears of health risks from exposure to EMFs, changes in neighbourhood aesthetics and loss in property values. The siting of wind turbines is also receiving community opposition due to noise, light flicker, aesthetic concerns, and loss in property values. The extent to which such attitudes are reflected in lower property values is not well understood.

Towers, Turbines and Transmission Lines: Impacts on Property Value outlines results of studies conducted in the US, the UK, Australia and New Zealand and offers guidance to valuers as well as to property/real estate appraisal students and property owners around the world. The book provides defensible tools that are becoming widely accepted to assess the effect that these environmental detriments have on property prices.

1

Introduction

Peter Dent and Sally Sims

1.1 Valuation and Environmental Attributes

Over the years it has become apparent that valuers¹ have experienced problems in determining the impact of high-voltage overhead power transmission lines (HVOTLs), cell towers and wind turbines on the value of proximate residential property. This book attempts to provide the best of current knowledge on the subject, and to lay out options for valuers based on the authors’ own personal research together with studies undertaken by others.

Valuation is a valuer’s opinion of the value of a particular interest in a property, on a specified date for a specified purpose. The process of valuation ‘requires the valuer to make impartial judgements as to the reliance to be given to different factual data or assumptions in arriving at a conclusion. For a valuation to be credible, it is important that those judgements can be seen to have been made in an environment that promotes transparency and minimises the influence of any subjective factors on the process’ (IVSC 2011; now also contained within RICS 2012, p.15).

A valuation is therefore a valuer’s written opinion of a property’s value, taking account of the purpose for which it is required as expressed in the terms of engagement. Investigations and enquiries undertaken to arrive at an appropriate figure will include an examination of the state of the market and analysis of any relevant comparable evidence. The valuer is therefore not simply concerned with the physical property when coming up with a value; the valuer is seeking to interpret a range of data about the property including its structure, size, location and market in order to advise a client with an opinion of value.

Property value is therefore not determined from a straightforward spreadsheet calculation, and it is not neatly incorporated into a rational model. There is a considerable amount of interpretation of facts from client, property, environment and market which has to be undertaken in order to enable the valuer to offer a professional opinion. In such circumstances, ‘a valuation is not a fact, it is an estimate. The degree of subjectivity involved will inevitably vary from case to case, as will the degree of certainty, or probability, that the valuer’s opinion of market value would exactly coincide with the price achieved were there an actual sale at the valuation date’ (RICS 2012, p. 87).

This book sets out to consider specific circumstances where a valuer’s opinion is sought. These circumstances include the impact on the value of homes that are proximate to HVOTLs, cell towers and wind turbine installations. While the impact from these structures on property values has been widely debated and researched, there is still uncertainty around their measurement and quantification. This book aims to provide guidance to valuers (and property/real estate appraisal students) around the world with defensible tools that are becoming widely accepted to assess these impacts whether on freehold owners or leaseholders. The authors have been undertaking research in this area for many years and believe that their experience and that of others who have contributed to this book will assist practitioners and their clients.

The book focuses on HVOTLs, cell towers and wind turbines partly because the siting of these environmental features has become controversial at various times in different countries and has consequently given rise to research. The process of researching these structures and their impacts has also helped to establish a methodology which can be universally applied across a much larger range of environmental factors.

When considering the impact of general locational factors on the value of any real estate development, there are certain overarching criteria which will influence the level of value impact of specific factors. These will range from the nature of the market at any one point in time, geographic location, physical structures, the prevailing sentiment towards these factors and, to some degree, the methodologies used to evaluate the impact of these factors. This introductory chapter therefore attempts to set a general context within which a valuer will have to evaluate the impact of perceived environmental detriments on specific properties.

1.2 Risk and Stigma

The valuation of properties impacted by disamenities is partly affected by the perceptions of risk and stigma of the various stakeholders in the buying/selling process, both of which can be influenced by media coverage. In any valuation exercise it is therefore important to have some understanding of what these two factors are (in the context of the valuation exercise) and how they may be perceived as influencing value.

1.2.1 Risk

One important aspect in considering the impact of HVOTLs, cell towers and wind turbines on individual property values is the level of risk that an individual perceives as existing in a set of circumstances. This will vary according to the parties within prospective markets. For instance, the business sector might not be as concerned about some negative environmental externalities (e.g. HVOTLs) as home buyers. But even a price reduction may not be sufficient to persuade a lending institution to finance the purchase. It may be that the reluctance towards lending on residential units that are underneath or in close proximity to HVOTLs shown by some lending institutions in the UK, for example, is due to the still unknown potential health risks from exposure to residential Electrical Magnetic Fields (EMFs) produced by such structures.

In 1996, the Royal Institution of Chartered Surveyors (RICS) introduced Practice Statement (PS) 3.7 to its Appraisal and Valuation Manual (the Red Book²) instructing valuers that, while there was no clear evidence of a link between living near HVOTLs and a number of adverse health effects, ‘…public perception may, however, affect marketability and future value of the property’(RICS 1995). This PS provided professional guidance to RICS members when undertaking the valuation of property near a HVOTL; however, no additional advice was provided to aid valuers when they determine the likely impact of negative public perception on house price. This Practice Statement has been omitted from the Red Book since May 2003 and, instead, advice to valuers is now included in the RICS Practice Standard Contamination, the Environment and Sustainability (RICS 2010).³ This suggests that, ‘if, when a valuation is carried out, there is a cause for concern over the strength of a field, an appropriate specialist or chartered environmental surveyor should be consulted’ (p. 42). However, unlike PS 3.7, this Practice Standard does not impose a duty on valuers when surveying this type of property to instruct clients that HVOTLs may affect future value due to negative public perception.

1.2.2 Stigma

The effect on property values of stigma from the presence of structures that are the focus of this book – HVOTLs, cell towers and wind turbines – is related to numerous factors. These include:

• the type of structure;
• the proximity of the structure to the property;
• visibility/audibility;
• prevailing market sentiment;
• ongoing media attention; and
• the current state of the property market.

These aspects of both risk and stigma and their meaning and potential impact on the value of individual properties are examined in more detail throughout the book.

1.3 Media Impact

Media attention alone can play a major role in influencing the degree of stigma and risk (real or perceived) associated with property affected by proximity to the above-mentioned structures.

During the mid-1990s, for example, media attention highlighted a potential relationship between living near HVOTLs and childhood cancer. The resulting publicity stigmatised homes near power lines and subsequently had a negative impact on the desirability and value of this type of residential property (Sims and Dent 2005). Similarly, an example of the impact of media attention was evident in the UK in 2000 with regard to cell towers. In this case, the UK Government responded by commissioning an Independent Expert Group on Mobile Phones (IEGMP) to assess the possible health risks. This resulted in the Stewart Report (IEGMP 2000; principally about handsets) which was highly publicised in the media. Subsequently, the public began to object to the siting of cell towers near their homes. This led to a number of cases where phone providers were refused planning permission to erect cell towers due to public concerns. This type of negative media coverage and public response has been mirrored around the world, with the perceived risks of cell phone towers regularly highlighted. For example, public concern was expressed in New Zealand and clauses to address those concerns and ‘protect’ the public were inserted into the Resource Management Act (2008).

With the recent growth in renewable energy production to help combat climate change, public concern has focused on wind turbine location (particularly before and during the construction phase). However, public negativity towards environmental features viewed as ‘unpleasant’ is not a new phenomenon or limited to HVOTLs, cell towers and wind turbines. For example, other environmental features viewed as unpleasant include landfill sites (Clark 2004), household waste incinerators (BBC 2002), opencast mines (McLaughlin 2009), airports (Nelson 2004), power plants (Bobseine 2008) and nuclear facilities (Lean 2009).

The risks and stigma of perceived ‘unpleasant’ land uses near homes can be measured via impacts to property values, which serve as a somewhat unbiased proxy of the true effects on a surrounding community. That notwithstanding, accurately determining the impact on property values of these perceived detrimental conditions and environmental features remains one of the most challenging aspects of property valuation. Previous studies have established that public perception of non-physical contamination such as visual, noise and odour pollution can influence the value and marketability of residential property, especially when there is an association with a possible health risk (e.g. Fischhoff 1985; Slovic 1987; McClelland et al. 1990; Slovic et al. 1991; Krimsky and Golding 1992; Mundy 1992; Chalmers and Roehr 1993; Syms 1996, 1997; Bell 1999; Gallimore and Jayne 1999; Jayne 2000). This in turn has led to uncertainty, fear and, occasionally, a diminution of house prices (e.g. Bond and Beamish 2005; Sims and Dent 2005). These and other studies will be used to explore the issues in more detail in Chapters 4 and 7.

1.4 Methodologies

As market value is a valuer’s opinion as to the price that a buyer would be willing to pay and a seller would be prepared to accept for a property at a specific point in time, when quantifying the degree to which property values are likely to be affected by environmental features it is useful to start by surveying the attitudes of the stakeholders involved, i.e. buyers, sellers, agents and valuers. However, modelling the actual impact on property prices requires a far more complex methodology.

Such methodologies are covered in more detail in Chapter 2 of this book. However, as an introduction it might be useful here to provide an overview of the two accepted methods of assessing value diminution.

The first approach involves surveying market participants. The initial survey approach, known as ‘contingent valuation’, involves the use of ...

Table of contents

• Cover
• Dedication
• Title page
• Copyright page
• About the Editors and Contributors
• Foreword
• 1 Introduction
• 2 Methods
• 3 Risk Perception, Stigma and Behaviour
• Part I: High-voltage Overhead Transmission Lines (HVOTLs) and House Prices
• Part II: Cell Phone Towers
• Part III: Wind Farms
• Index
• Other Books Available from Wiley-Blackwell