Estimating the impacts of PFAS contamination on the housing market: a case study in Pennsylvania

Abstract

Like many other states, Pennsylvania has experienced large-scale Per- and polyfluoroalkyl substances (PFAS) contamination in drinking water among communities near military bases and other facilities where these materials are common, putting residents at risk for severe health impacts. PFAS contamination and perceptions built on increased media attention may damage residential real estate values, partially indicating the extent to which residents are willing-to-pay to reduce exposure to these toxic chemicals. Using a large dataset (N= 157,817) of single-family home transactions between 2010 and 2022 in Bucks and Montgomery counties, we estimate the potentially damaging effects of PFAS contamination in drinking water in the local housing market. Using a difference-in-differences (DID) design framework and spatial fixed effects, our hedonic analysis shows property value depreciation due to PFAS contamination. In our main specification, the average home price within the contaminated public water system (PWS) service area drops by 2.8 percent relative to the homes sold outside this geographic extent. Further analyses find that this effect extends beyond the immediate contaminated PWS service area as people’s awareness of public announcements and associated media coverage affected the housing market regardless of the local testing results. The findings we articulate in this hedonic analysis are robust to different DID specifications, a subsample of the transactions, and falsification tests. Perceptions of risk, often have measurable effects on property value, which is borne out in our analysis of PFAS. The study results can inform a cost-benefit analysis of PFAS regulation and remediation of known contamination.