ABSTRACT
Raymond B. Palmquist Introduction There have been many different types of rural land-use change in recent years as populations grow and technologies change. The causes and effects of these changes are discussed throughout this book. One of the useful techniques for valuation is to study the effects of changes on land values or property values. This chapter presents an example using the conversion to large-scale, concentrated hog feed operations in southeastern North Carolina. While this example is a single case study, in the process of describing it, the various modeling and estimation decisions that will be present in any rural land value or property value study are highlighted. Studies of rural land values have been around for many years and became quite common in the 1980s. Many, but not all of these, have used the characteristics of agricultural land to explain land prices. In recent years, hedonic techniques developed within the context of urban housing markets have been applied to agricultural land. However, it is important to be aware that agricultural land is a differentiated factor of production, whereas residential land is a differentiated consumer good; the later case is what was described in Chapter 13. This means that the hedonic models for the two types of land are different.1 It is important to consider the underlying model in choosing an appropriate specification for a hedonic equation. Many hedonic studies of rural land have focused on land in agricultural use that will be likely to stay in that use in the future (at least over the short term). The important characteristics of such land include the productivity of the land, as well as considerations, such as how susceptible it is to erosion or the need for drainage. Examples of such studies include Miranowski and Hammes (1984), Ervin and Mill (1985), Gardner and Barrows (1985), King and Sinden (1988), and Palmquist and Danielson (1989). Other studies have concentrated on the effects of urban proximity on farmland values. The potential future conversion of agricultural land
to urban uses is more closely related to the topic of this current book. Examples of this research include Chicoine (1981), Dunford, Marti, and Mittelhammer (1985), Pardew, Shane, and Yanagida (1986), and Shonkwiler and Reynolds (1986). Recently Bockstael and colleagues applied spatial econometrics to land-use conversion issues using hedonic, discrete choice, and duration models (for example, see Bockstael 1996; Geohegan et al. 1997; Bell and Bockstael 2000; and Irwin and Bockstael, forthcoming). There have been fewer studies that focus on rural residential land and consider the effects of changes in the land use on surrounding agricultural lands. If technological innovations make agricultural lands more productive, surrounding lands may also appreciate in value because of the productivity improvements. Even if the surrounding lands stay in residential use, the value may appreciate because of the increased employment opportunities or the improved tax base in the county. However, it is also possible that the new uses of agricultural land will have negative spillover effects on the surrounding residential land, which may adversely affects property values. This is the type of effect studied in the current research. Swine Production There was a rapid transformation in the swine production industry during the 1990s. Earlier, most swine were produced in relatively small herds and the animals were not as concentrated as they are today. North Carolina was a leader in moving toward production in concentrated feeding operations. While North Carolina was second to Iowa in hog production, North Carolina production was predominantly in concentrated feed lots, while most Iowa production was more dispersed. In North Carolina it was estimated that 95 per cent of the swine output was produced on just 13 per cent of the farms with hogs. This rapid movement to concentrated feeding operations represented a major shift in rural land use in the southeastern counties of North Carolina. This change resulted in increases in income and employment in these areas. However, it also resulted in concerns about the odor from hog barns and from the field application of hog manure. There were, as well, concerns about the effects on ground and surface waters. Vigorous political debates about these environmental issues followed. Some people who lived near large hog operations claimed that they could not sell their houses at any price because of the stench. Hog producers contended that the odor was barely perceptible, or at least not bothersome, so they maintained that housing prices were unaffected. Multiple bills were introduced in the North Carolina General Assembly to regulate swine production starting in 1993, but only a bill funding further research passed.
