The development affects the value of nearby homes differently, depending on how far a home is from a well, how long ago it was drilled, and whether the home relies on groundwater aquifers for their water supply.
The study, authored by RFF Fellow Lucija Muehlenbachs, Beia Spiller of the Environmental Defense Fund, and Christopher Timmins of Duke University, relied on the sale price of hundreds of thousands of properties across 36 counties in Pennsylvania and New York from 1995 to 2012 (the data were obtained from CoreLogic).
For homes that depend on groundwater, the closer they are to a shale gas well, the worse off they are (e.g., at 1.5km, a shale gas well decreases values by 4 percent but at 1km it decreases values by 22 percent). For homes that have access to piped water, being within 1.5km or 2km increases their value (by 3 to 6 percent), likely due to royalty payments, but being closer (i.e., within 1km) does not affect values.
At a regional level (within 20km), recently drilled wells have a positive effect on property values. This “boomtown” effect, however, is temporary and fades one year after the well’s drilling.
“We show that it is not a simple story of everyone winning or everyone losing,” says Muehlenbachs. “For example, while there are temporary regional benefits from drilling, it turns out that the presence of undrilled wells that were permitted more than a year ago has a negative effect on property values.”
This study, The Housing Market Impacts of Shale Gas Development, expands on earlier research by the authors that also resulted in similar findings but focused only on homes in Washington County, Pennsylvania.