The Property Value Impacts of Industrial Chemical Accidents

Using hedonic property value methods, we examine how chemical accidents at industrial facilities impact home values in surrounding communities. The study focuses on facilities regulated by the U.S. Environmental Protection Agency’s (EPA) Risk Management Plan (RMP) program, which is in place to reduce the risk of harm to offsite populations from accidental chemical fires, explosions, and releases of toxic vapors. RMP facility and accident data were linked to residential property transactions in Michigan, Ohio, and Pennsylvania occurring between 2004 and 2014. To facilitate causal inference, alternative quasi-experimental difference-in-differences and triple differences models are estimated, where we compare homes near and far, and before and after, an accident; as well as homes near RMP facilities where an accident did and did not occur. We find that the typical accident does not affect home values, but accidents resulting in offsite injuries, property damage, evacuations, or shelter-in-place orders lead to a 5% to 7% decrease in the value of homes within five kilometers, this translates to an average loss of $12,000 to $17,000 per home. The benefits of the RMP program in avoiding these impacts are particularly relevant from an environmental justice standpoint. We find that proximity to an RMP facility, irrespective of any incidents, is already associated with significantly lower home values. These existing inequities are exacerbated by chemical accidents that impact offsite populations.