Hoen, again: statistics versus reality
Author: | Property values
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Ben Hoen has just published his latest property value study. It was issued under the auspices of Berkeley Labs, sponsored by the Office of Energy Efficiency and Renewable Energy (Wind and Water Power Technologies Office) of the U.S. Department of Energy. This study contains 51,276 sales, more than any previous study, spread over 9 states, 27 counties and 67 different wind projects. The study goes for 38 pages, concluding: “Across all model specifications, we find no statistical evidence that home prices near wind turbines were affected in either the post-construction or post-announcement/pre-construction periods.”
No doubt the industry and its supporters like AWEA will be loudly broadcasting this result. No doubt sympathetic reporters and politicians will pick up on the buzz and accept its conclusions with no further reflection, not to mention actually taking the time to read the study. That’s a shame, as this latest Hoen study is just one more example of how statistics can be used to prove just about anything you want proved. And the DOE really wants to prove that wind turbines don’t affect home prices.
Take the AWEA blog entry linked to above, titled “Wind Power Has No Effect On Property Values”. Except that isn’t what the study actually said. What Hoen said was they didn’t find any statistical evidence of any effect. There is quite a bit of evidence in this study that home prices near turbines take a beating, but when the statisticians finish with it all that somehow disappears.
If we look at the pre–statistical manipulation numbers we can get a pretty fair idea of the effects of wind turbines on prices. Below is a snapshot of the first set of figures in Hoen’s Table 7 (page 25).
The PA, PAPC and PC columns show the average prices as a nearby project moves from Pre-Announcement to Post-Construction. As always, I’m interested in comparing the close-in properties (in this case, less than 1 mile) with the far-away properties (in this case, more than 3 miles). Even before the project is formally announced (and I can tell you first hand that a project is known about well before any formal announcement) nearby home prices are 15% lower than their lucky neighbors. Even worse, as time marches on and the project goes into operation the price difference widens to 28%. These numbers just happen to be in the same ballpark as those quoted by McCann, Lansink and Sunak.
Hoen admits these price differences exist at the top of page 24, but goes on to say: “Both conclusions of adverse turbine effects, however, disregard other important differences between the homes, which vary over the periods and distances.” And what would those important differences be? His raw data includes just house square feet, acres and age. The close-in houses have, on average, about 100 more square feet than the far-aways (roughly 1550 vs 1650). They average 2 acres vs. somewhat less than 1. They are older, averaging about 60 years vs 50. Would you be willing to trade off an extra 10 years of age for a much larger lot and some extra space? I think most people would, so there’s nothing in the raw data to explain the difference – except, of course, the elephant in the room, the turbines. You could try to argue that maybe there’s some other problem with the close-ins. Did I mention these data came from 9 states, 27 counties and 67 projects? It is quite a stretch to propose something else, as even a landfill at every one of the close-in neighborhoods wouldn’t be enough (Hoen, page 4). It seems that wind turbines are in a class of their own when it comes to decreasing house prices.
So how does Hoen ever get to the conclusion that he does? I have to confess, the study is written in such a way that I can’t figure it out. I’m reasonably literate and numerate for a layperson, and if I can’t figure it out it means one of two things. Either it was written for a specific audience (in this case, professional statisticians) or it was meant to obfuscate.
Hoen tries to make it look like he tried to do an unbiased study, and maybe he did. But to get from these raw data to his conclusions requires a lot of manipulations and there’s no way we can ferret out all of them. As just one example, he pools the sales data from all 9 states, as disparate as Oklahoma and New Jersey. Are properties in Oklahoma and New Jersey from the same population? Of course not, but pooling them increases the Standard Deviation, making statistical significance more elusive – and NOT finding statistical significance is what his sponsor really wants. When the raw data shows one thing and the conclusions show another I get suspicious, especially when the flip is in the sponsor’s interests.
Partly as a result of the pooling, Hoen’s average house price was (from Table 3 on page 21) $122,475 with a standard deviation of $80,367. To get to “statistical significance” you generally have to get two populations (in this case, the close-ins and the far-aways) about 2 SD’s apart. Clearly that won’t happen here, no matter how much the wind turbines affect the prices. Finding a group of smaller apples on size alone is pretty hard work when you’ve pooled apples and peaches together.
I have no doubt that someone could take this same data and more convincingly make the opposite case, that wind turbines do affect house prices. Unfortunately, we all know the payer calls the tune, and in this case Mr. Hoen appears to be making a living by faithfully playing the right tune.
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