Study sheds light on solar farm impacts to property values

As solar energy becomes more affordable and widespread, farmland has emerged as a prime location for large-scale solar development. But with this expansion comes a persistent question: Do nearby property values suffer when solar farms move in?

In a paper published in the Proceedings of the National Academy of Sciences, researchers in Virginia Tech’s Department of Agricultural and Applied Economics in the College of Agriculture and Life Sciences looked at millions of property sales and thousands of commercial solar sites to shed some light on one of the most commonly cited downsides of large-scale solar adoption.

“As the U.S. scales up renewable energy, solar installations are increasingly being sited near homes and on farmland, and this often leads to pushback from residents worried about aesthetics or property value loss,” said Chenyang Hu, a graduate research assistant in the Department of Agricultural and Applied Economics and the paper’s lead author.

“Until now, much of this discussion has been based on anecdotal evidence.”

The stigma that solar panels are visually unappealing and will lower the value of nearby land has been around in some form or another since adoption of the technology first began in the ’70s.

Mapping solar’s real estate impact

Led by Zhenshan Chen, assistant professor of agricultural and applied economics and the study’s corresponding author, in partnership with Pengfei Liu, associate professor of environmental and natural resource economics at the University of Rhode Island, the team set out to understand whether the phenomenon is really occurring or just a common misconception.

Team members realized that in order to understand the full scope of this belief, they’d need to look at an exhaustive number of examples. They started by identifying 3,699 large-scale solar photovoltaic sites.

The researchers then found residential homes and agricultural or vacant land sites near each installation by combing through nearly 9 million real estate transactions, which allowed them to chart the value of the properties over time—starting 15 years prior to construction of the solar site through 2020—against their distance from the solar array.

“We also built a national model of solar visibility from properties, which allows us to see whether simply having a view of a site matters for home prices,” Hu said. “We used a difference-in-differences econometric model to estimate property values over time.”

Agricultural land sees a big boost while residential values dip slightly

What they found was that the answer isn’t so straightforward. On average, agricultural and vacant land within two miles of the site saw a 19.4% increase in value. Chen said this indicates that the value of land with high potential for future solar leasing has risen considerably.

How residential properties were affected is where it gets complicated. Residential homes within three miles of a site lost a small amount of value—4.8% on average.

“This negative impact also decreased with distance from the site, time since the installation was built, and did not affect residential homes on lots larger than five acres,” Chen said. “Site visibility from the property didn’t significantly impact the cost.”

Given the relatively minor impact on residential properties and the wide number of variables that affect them, Hu chalks it up to small variations in regional views on solar energy.

“The negative residential impacts appear to stem more from perception or a stigma effect than from any physical harm,” he said. “Interestingly, these effects are much smaller or even reversed entirely in countries that are politically left-leaning.”

Guiding smarter solar development

Chen hopes their findings will help dispel negative perceptions about solar panel adoption, especially when it comes to agriculture. He wants other researchers to take the baton and run with it.

“In this study, we provided a very general quantification of the property value impacts, and we anticipate more similar works in specific contexts,” he said. “Ideally, policymakers, developers, and local communities could absorb such information and organize meaningful discussions on how such problems could be addressed.”

Hu said he wants the study to lead to smarter community planning and give residents more of a voice in how nearby solar installations are built.

“I hope this work helps improve how solar projects are planned and approved by providing data that shows where and how local impacts are most likely to occur,” he said.

“Ideally, developers and local governments can use this information to make siting decisions that minimize disruption and to respond more directly to community concerns.”