WHEN potential purchasers look around a house for sale, it's the property's visible features that typically draw most attention. The number of bedrooms, amount of floor space, and what the local area is like all tend to have the greatest influence on how much a house is worth. On the other hand, environmental threats to particular properties—from flooding, pollution, and other disasters—are often not considered by potential buyers, because they are not immediately obvious. But new research suggests these less-visible factors are now starting to affect property values as well.
A new NBER paper* argues that the impact of fracking on water quality has affected the value of otherwise similar properties in parts of America. Although the paper's authors show that shale-gas development has an overall positive impact on house prices, this is not equally shared between all houses in a local area.
Instead, it depends on where they source their water. Looking at house prices in parts of Pennsylvania and New York between 1995 and 2012, the paper finds that house prices near shale-gas developments fall when they rely on ground-water sources for their water supplies, because of fears that the fracking process may pollute local aquifers. However, homes which are similar but are dependent on piped water from other areas appear to receive a small boost in value from such developments.
