Nuclear Waste Transport and Residential Property Values: Estimating the Effects of Perceived Risk

by Jeff Smith

This paper attempts to use a current, highly publicized case regarding spent nuclear fuel shipments in South Carolina to test the effects on residential property values. As the title implies, the premise is that perceived risk may be all that’s necessary to affect human behavior, whether the perception is true or not. The authors cite previous studies that have empirically proven that environmental disamenities (hazardous waste sites, garbage dumps, etc.) reduce residential property values. Several other studies cited show that housing markets respond to both the introduction and elimination of disamenities. The authors associate this to the possibility of changing risk perceptions. What is the bottom line from these studies? “Sticky” housing prices may be associated with the differing perceptions of risk by experts and lay persons. Looking specifically at housing prices and nuclear material, this paper uses several studies that failed to establish a link between property values in the vicinity and nuclear power plants that were in close proximity to the houses. This is presumably due to the positive economic affect associated with the plant, such as increased tax base and high paying jobs. However, the authors study nuclear waste storage and transport, an area that may show a negative relationship because there are no offsetting economic benefits, such as well-paying jobs or larger tax revenues. The study focuses on shipments through three counties in South Carolina: Aiken, Beasley and Charleston. Shipments consisted of highly radioactive spent fuel rods, which were previously loaned to foreign governments under the condition that the rods be returned to the U.S. once they were spent (to prevent use of the rods in nuclear weapons). Once the Savannah River Site (SRS) was selected as a destination for the rods, local and federal politicians objected strenuously, due to the perceived deleterious health and economic effects on South Carolinians. A survey conducted in the 3 counties showed perceived risk among households to be greater in Beasley and Charleston county, while the perception was statistically less significant in Aiken (which is the home of the SRS). Consequently, there should be a greater effect on home values in Beasley and Charleston than in Aiken. A telephone survey of realtors in the three counties did not support the argument that nuclear shipments affected property values. Data for the study included residential property sales in the three S.C. counties between 1991 and 1996 (4 shipments transpired during this period). 9,432 observations are in the sample, 471 from rural Aiken County, 1,834 from rural Beasley County and 7,228 from the populous, urban Charleston County. Therefore, the sample is largely drawn from Charleston County, a potential for bias. Prices were deflated using 1990 taxable values to control for relative annual appreciation. Several variables, including square footage, age of structure, distance from fuel shipment route and several census block level variables were also collected. The authors use a hedonic house price model with individual structural characteristics (S), neighborhood characteristics (N), and distance (D).
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where Pi – transition price, β and γ are vectors that measure marginal effects of their respective characteristics, and δ is the marginal effect of distance from the transport route. The authors note that spatial correlation is a prevalent and underexamined issue when using hedonic house price models. They use Moran’s I to diagnose the spatial correlation and an instrumental variable method to correct for this correlation. Therefore, their spatial hedonic regression model is:
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Empirical analysis- the authors use a Box-Cox model to estimate the relationship. They determined, using the Box-Cox, that a log-linear model, with logged dependent variable and linear explanatory variables (other than NPRICE3) is preferred. This was determined without using the data regarding the timing of shipments. That was subsequently estimated by the use of dummy variables. The authors use two working hypotheses, (1) homes distant from the shipment route commanded a greater premium once shipments started, (2) in Aiken and Charleston Counties, the premium did not decrease as the shipments proceeded, since over this time period there was no news about terminating the shipment. That is to say regarding (2), the permanence of the shipments determines the permanence of the stigma from locating closer to the rail route. Additionally, shipment-timing dummies were introduced to capture the range of effects of the shipment, such as the lead and lag effects around each shipment. Looking at the results, Charleston County did exhibit an increase distance premium post nuclear fuel shipments. The suggestion of permanence was robust across several linear and Box-Cox models. Results for Beasley, due possibly to other entangling effects not accounted for in the model, do not show the predicted decrease in the value of residential homes near the rail route coincide with the onset of fuel shipments. Aiken County was not even close to statistical significance, indicating proximity to the rail route was not a disamenity either before or after fuel shipments. The analysis of Charleston County data suggest possible real price affects from highly publicized, controversial radioactive waste shipments. The authors undertook this study because of the planned implementation of nuclear fuel shipments to Nevada. Congressional language in the bill authorizing transport required compensation for anyone whose property value declined by more than 20 percent. If their property declined more than 50 percent, than the Department of Energy is required to purchase the property outright. The conclusion of this study may not be applicable to the situation in Nevada. While I’m not familiar with the proposed route, be it rail or highway, I doubt that major urban centers like Nevada or Reno will be in the transportation plan. Given that the conclusions reached regarding the possible affects of shipments are a direct result of transport through Charleston County, indeed through Charleston itself (these rods were shipped to the port, then taken by railroad to Aiken), I don’t believe the authors can extend this case to predict home price effects in Nevada. Therefore, as a stand-alone study, it was interesting and possibly germane to Tennessee residents, however extensions to Nevada are doubtful.

In the Journal of Environmental Economics and Management, Volume 42, Number 2, September 2001, pp 207 – 233