When an oil pipeline or tanker spills, how many homes are impacted and what do those impacts look like?
Our recently released report How do pipeline spills impact property values? concludes that, although direct contamination certainly hurts a home’s value, even neighbouring areas can expect to lose some value in the aftermath of a spill or other incident.
This is because public perception extends beyond the homes that are directly impacted. Especially if it’s not the first spill or leak along a particular pipeline, the surrounding area’s reputation will suffer.
Three cases of reputational damage highlighted in the report show an average value loss of 5-8% for homes up to a kilometre away from the incident. In Vancouver, where the average price of a home is just over $600,000, this could amount to a loss of $30-40,000.
A new report from CRED, How do pipeline spills impact property values?, reveals that an oil spill in Burrard Inlet or along BC’s south coast has the potential to negatively impact property values and cost jobs in real estate and property development, in areas both adjacent to spill sites as well as the surrounding region.
DOWNLOAD THE REPORT
The research concludes that oil spills have direct and lasting impacts on property values. In particular, the report finds that:
- In eight documented cases, properties directly impacted by spills were significantly devalued
- Nearby properties lost up to 8% of their value
- Where homes relied on well water and the groundwater was contaminated, the value loss was permanent
The goal of the report is to increase access to information and support a transparent conversation around the economic risks and rewards of Kinder Morgan’s proposed new Trans Mountain pipeline. CRED is calling for an independent study of the economic risks of the proposal.
Downloadable image highlighting the report’s main conclusion:
Business leaders react to the report’s findings
“This report brings up important information and concerns. As planners, it’s our job to be aware of all potential risks to housing and land values. We hope that the government will take action to protect Vancouver’s market from the impacts of an oil spill.” – Blaire Chisholm, Planning Manager at Brook Pooni Associates
“Vancouver is famous the world over for its natural beauty and pristine environment. This is the driving force behind all of our real estate-related industries. As a realtor, it is my responsibility to let my clients know about the risks they could face by buying a property near pipeline infrastructures.” – North Shore realtor and CRED advisor Dallas la Porta
“As a realtor I have noticed that with the huge amount of negative publicity surrounding the expansion of this pipeline, people are on red alert and are very aware of the potential impacts of the pipeline on their properties. As a result, buyers will typically avoid a property anywhere near a pipeline and this does have a negative impact on values.” – Langley realtor Annabel Young
Read the full report here
The following is an excerpt from CRED’s upcoming report. To be notified when the report is launched and available for download, please contact us or join our mailing list.
British Columbia’s property development sector is a significant driver of economic growth and an important source of employment. According to the Urban Development Institute, the sector is directly and indirectly responsible for over 220,000 jobs across the province, in areas from planning and construction to secondary supplier purchases. It makes a bigger contribution to provincial GDP than any other sector – more than natural gas, tourism, mining, forestry or film and television.
In the real estate sector, a sub-section of the property development industry, there are over 14,000 people working as realtors in Greater Vancouver, Vancouver Island and the Gulf Islands alone. The coastal real estate market is also important to private homeowners who gain value not only from a physical property but from its viewscape, proximity to waterfront and wilderness, and location in one of the world’s most liveable regions.
CRED is seeking to better understand the risks of an oil spill as part of an ongoing dialogue about the economic future of the region. Where are the best places to invest for future growth and prosperity? How can we safeguard our quality of life and support industries that will ensure long-term responsible development?
Real World Examples
To begin assessing risk, we gathered information on eight separate oil spills in the US and Canada. In three of the cases, the spills directly impacted properties and in two further cases, the proximity and perceived impact of the incidents devalued properties. In the final three cases, residents have claimed values losses but they have not yet been independently confirmed.
Case study: Pepco Pipeline, Maryland, 2000
Loss in value: 11-12% in the 1st year
In 2000, a 3,800-barrel (120,000-gallon) oil spill in a suburb of Washington DC affected property near the Patuxent River. A study published in The Appraisal Journal in 2001 concluded that waterfront and beach-access homes were significantly and negatively affected by the spill.
In the year following the incident, home values within a 10-mile study area fell 11%. In addition, waterfront properties experienced reduced sales volume. According to real estate listing data, only three waterfront homes sold in the first sale season after the spill, a 40% decrease from the previous year. Because there was no substantial variation in regional markets, the study concluded that this decline was likely due to the spill.
This is a small excerpt from an upcoming CRED report on the link between oil spills and local property values. If you would like to read the whole report, please contact us or join our mailing list.
Our first Credible Conversations forum was held May 29th in Vancouver. Over 100 business leaders, entrepreneurs, politicians, First Nations representatives and BC residents came together to discuss the economic risks of pipeline expansion and explore how to build a more diversified economy on the west coast.
*These are rough notes from the break-out sessions and are not meant to convey the opinions of all CRED members, or even all participants in the break-out group.
How could a new oil pipeline affect the real estate and property development industries?
- Value of homes detrimentally impacted
- Risk to property values
- Affects Vancouver’s brand
- Vancouver becoming a “petrol-port”
- Health impacts – fumes from trucks and tankers
- Harbour view affected
- Kinder Morgan media plugs help raise awareness about the region
- Kinder Morgan is reaching out to community regarding their proposal
- Economic growth = population growth, more development, higher real estate values
- Increased tax income to pipeline municipalities
- How much do people value the Vancouver brand?
- At what point is the impact too much to be allowable?
- How long does it take to recover from an oil spill?
- Is it possible to completely recover from an oil spill?
- What are the economic costs of environmental degradation i.e. airshed quality?
- Can Vancouver still be the “greenest city” if the project goes ahead?
- How much would it cost to insure the pipeline without government coverage?
- What / how many / for how long will new jobs be around for?
- Will the pipeline attract people to move to Vancouver?
- How would an earthquake affect the pipeline / tankers?