Researcher Claims Fracking Craters Home Values, Could Bring New Housing Crisis

Chris White | Energy Reporter

The professor who warned in February hydraulic fracking could bring about a new “housing crisis” has now authored a study showing fracking decreases housing values by tens of thousands of dollars.

Research on fracking conducted in Pennsylvania by Christopher Timmins, an economics professor at Duke University, found that in areas using well water, home prices dropped by an average of $30,1676 when shale drilling occurred within a mile. Homes using piped water, on the other hand, gained an average of $4,800 in value after shale wells opened nearby.

“Our results show clearly that housing markets are responding to homeowners’ concerns about groundwater contamination from shale gas development,” Timmins noted. “We may not know for many years whether these concerns are valid or not. However, they are creating a real cost to property owners today.”

The study also found if a household relies strictly on well water, its participants can expect to see a 13.9 percent decrease in their home’s value if it is one mile away from a a fracking well. The same family can expect to see their house value remain constant if the fracking well is more than 2 miles away, according to Timmons’s research.

Coincidentally, those living in houses with a piped-water supply typically find their home values rising slightly after shale wells opened nearby, due in par, the study wagered, because of royalty payments by shale gas companies.

Earlier this year, in February, Timmins told a group of people at a presentation the perceived risk of groundwater contamination from natural gas extraction could have an adverse impact on housing prices, mortgage issuance and local tax collection. The impact could be bad enough, the professor warned, to usher in the next housing crisis.

The previous housing crisis — in 2008 — was the result of a meltdown in sub-prime mortgage lending, not a dramatic decrease in land value.

The research, according to the authors, is the first study to link slinking home values to horizontal drilling, or “fracturing.”  The practice of drilling for shale oil stuck beneath the Earth’s surface has exploded, ushering a renaissance of sorts by transforming the United States into a leading natural gas producer and potential oil and gas exporter.

The results have been dramatic. Shale production exploded between 2011 and 2013, reducing foreign oil imports by nearly one-third, according to the U.S. Energy Information Administration (EIA), and by 40 percent compared in 2006.

Still, Timmins warned, more work has to be done to limit the negative effects fracking presents to home values.

“Regular water testing and Improved drilling and hydraulic fracturing regulations – or perhaps simply more transparency – could help allay homeowner’s concerns,” Timmins said.

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