'Animal Operations and Residential Property Values'.

Author:Massey, Raymond

To the Editor

I am writing to comment on the article "Animal Operations and Residential Property Values" (Winter 2015), by John A. Kilpatrick, PhD, MAI. (1) In that article, Mr. Kilpatrick defines animal operations (AOs) as "facilities in which animals are raised or brought for slaughter. The common denominator is a large perpetual inventory and density of animals." (Page 41) In his article, he cites seven peer-reviewed economic studies; however, my reading of those studies indicates that the text of the studies cited does not reflect what is stated in this article. To demonstrate the discrepancies, the following compares quotes from Mr. Kilpatrick's article with the specific content in the studies cited.

Mr. Kilpatrick states, "Kuethe and Keeney find that the negative impacts of AOs are comparable to those generated by industrial waste, solid waste, and septic waste facilities." (Page 45) Table 3 of the Kuethe and Keeney study (2) summarizes the impacts of the various sources of externalities, showing that industrial waste and septic waste facilities negatively impacted houses of all prices. Kuethe and Keeney find, however, that AOs negatively impacted more expensive houses (those with prices in the 60%-100% quantiles) but did not negatively affect lower-priced homes (those in the 10%-50% quantiles).

Mr. Kilpatrick also states, "Kim and Goldsmith analyze property values of 2,155 homes located within 3 miles of an AO in North Carolina. The principle focus of their study is spatial hedonics, and within a 3-mile area they find the average impact to be negative 18%. At 1 mile, they find the impact is negative 23.5%." (Page 45) However, Kim and Goldsmith actually write, "Property values declined per hog by -$0.51 at 0.75 mile, -$0.68 at 1 mile, and $0.53 at 1.25 mile in the linear Box-Cox model estimates. Compared to the linear Box-Cox model spatial lag property value loss estimates decreased $.04 (8%) to -$0.47 at 0.75 mile, $.16 (24%) to -$0.52 at 1 mile, and $.11 (21%) to -$0.42 at 1.25 mile. The impact on the value of the median house ($63,520) 1 mile from a swine facility with 10,000 head fell from -$6,800 to -$5,200, or 23.5%. Thus, not accounting for spatial auto-correlation in the form of spatial lag dependence overstated the negative impact of hog farms on neighboring housing values by 18% on average. (3)

Two errors occur in the above summaries of the research. First, when Kim and Goldsmith mention 23.5% they are comparing two different econometric models, not the impact on housing prices. The impact was not a 23.5% decrease in value. The impact of accounting for spatial auto-correlation (a better econometric model) was that the negative impact was decreased 23.5%. In other words, by using a more accurate model, the overestimation of a model without spatial auto-correlation overestimated the negative impact of AOs on housing values. Using the wrong model had "overstated the negative impact of hog farms on neighboring houses by an average of 18%." Second, Kim and Goldsmith state, "Our estimate of a -$0.52 per hog, or -$5,200 (-8.2%) per house, impact on the value of a house located 1-mile from a swine facility is consistent with the results of previous research." They find an 8.2% negative impact rather than "the average impact to be negative 18%."

Mr. Kilpatrick also references a case study by Isakson and Ecker; he states, "The study shows large adverse impacts for houses located within 3 miles and directly downwind from a CAFO--a loss of value of as much as 44.1%." (Page 45) Isakson and Ecker write, however, "Houses directly downwind and within 2 miles [emphasis added] of a CAFO can suffer as much as a 44.1% loss in value (but, only one house is essentially (89.1[degrees]) directly downwind and within 2 miles of a CAFO). At the average wind-angle (33.95[degrees]), the loss in value for houses within 2 miles of a CAFO is slightly over 16.6%. ... Houses directly downwind within 3 miles of a CAFO (holding CAFO size constant) suffer a maximum loss in value of 9.9%, while at the average wind angle they suffer a 3.7% loss in value." (4) Mr. Kilpatrick's mixing of 3 miles with...

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