Study: Regulated livestock operations can have a small positive effect on property values
Nov. 10, 2008
BLOOMINGTON, Ind. -- Regulated livestock operations (RLOs) can have a small positive effect on nearby residential property values in rural areas, according to a new Indiana University study.
The study, produced by the Indiana Business Research Center (IBRC) for the Indiana Soybean Alliance (ISA), bases its results in part on an analysis of real estate transactions in three Indiana counties between 2000-2006.
Specifically, the researchers examined the effects of RLOs, known as concentrated animal feeding operations (CAFOs) and confined feeding operations (CFOs), on residential property values.
Researchers reviewed real estate transactions in Decatur, Hancock and Shelby counties -- each of which had a sufficient concentration of regulated livestock operations and property sales transactions to yield a rigorous statistical analysis. Unlike many past studies that used the appraised property value, this study used the market price of 7,849 real estate transactions.
Among the study's findings:
- An RLO within one mile of a non-town residence increased sale price by $12,700.
- Every 100 market-mature hogs on RLOs within one mile of a non-town residence reduced sale price by $550.
- As a ballpark estimate, therefore, a 4,000-head RLO of not-yet-mature hogs within one mile of a non-town residence would have no net effect on sale price (assuming there were no other RLOs within three miles).
- In-town residential properties were more affected by proximity to an RLO and were more affected by being downwind of an RLO than a non-town property.
- Proximity to beef cattle tended to have a positive effect on sale price while dairy cattle tended to have a negative effect.
Timothy Slaper, co-author of the report and director of economic analysis for the IBRC at IU's Kelley School of Business, said the study's findings present a complicated picture.
"A definitive negative impact on property values could not be supported statistically," Slaper said. "The relative sensitivity of town versus rural properties to the proximity of a RLO is noteworthy. An RLO can have a positive effect on property value in rural areas. In contrast, close proximity to an RLO most likely has a negative effect on property values for in-town residences."
Another component of the study was a survey of real estate professionals about their perceptions of the effects of RLOs on property values. Most respondents said they believed RLOs reduced nearby residential property values, although real estate agents had a more pronounced negative perception than real estate appraisers.
"The study reinforces the fact that assessing the impact of an RLO on property values is very complicated and to make unsubstantiated statements that any or all CAFOs and CFOs have a negative impact on property values is not supported by the study findings," said ISA Interim Executive Director Jane Ade Stevens.
The study also showed that the effect of RLOs had on town or non-town/rural residences primarily depended on the concentration and type of livestock, distance to closest RLO and prevailing wind direction.
Slaper acknowledged that the study's findings are somewhat mixed. "The transaction data do not support an unambiguous answer," he said. "The data do advance the discussion, however, by highlighting the nature and source of the economic effects associated with the placement and size of regulated livestock operations."
Slaper also highlighted the fact that the results from this study cannot be used to measure effects in other counties, states or regions, or over a different period of time.
"We appreciate that this data provides us a snapshot of a moment in time in these three counties," Stevens said. "ISA commissioned the study because Indiana's livestock and poultry industries are the soybean farmer's number one customer for soybean meal and critical to Indiana's soybean farmers' future."
The complete report is available online at www.ibrc.indiana.edu/studies/RLOs_and_Indiana_Property_Values.html.