Buyouts are an easy fix

One obvious solution to the problem of noise, flicker and property values is for the developer to buy out the properties (at pre-project market prices, of course) of all the affected neighbors.  Of course there would be a large number of details to be worked out, but there’s a lot of precedence for the buying out of properties close to industrial projects.  I’m sure a fair and equitable scheme could be found.  And since proponents say there’s no diminution of property values, what possible reason would they have to object to this?

About the only reasonable objection I can think of is that the developer is not a real estate firm, and shouldn’t be bothered with all these transactions.  Fine, pass them off to a brokerage – this is done all the time with relo’s and such.  How much should all this cost?  Let’s take what may be the worst case in Ontario and perhaps North America –  Wolfe Island.  There are roughly 280 homes within 1 kilometer of the project, lets say that 140 of them would take a buyout (about 50 are participants, and thus wouldn’t be eligible), and that their average market value is $180,000.  If the brokerage charges 6% and manages to sell all the homes at their market value (and the proponents assure us that is what their studies show) that comes to about $1.5 million.  About half of one of Wolfe’s 86 turbines.

But the developers absolutely refuse to even entertain doing this.  What reasons do they provide for this refusal?  Actually, none.  The governments, as far as I know without exception, haven’t even been asking for any type of guarantee or bond, so the developers never even have to defend their refusal.  Other proponents offer up reasons that cast the neighbors as just eager to pawn their houses off to the poor developer, usually because they “just don’t like the looks” of the turbines.

I’m sorry, but not many people I know will go to the considerable trouble of moving just because they don’t like the look of something.  They will however move if they fear or experience the noise and other disturbances the turbines will make.  And the developer rightly fears that he will get stuck with a large number of valueless houses.  In Wolfe’s case, 140 houses at $180k each is a cool $25 million.  This is an excellent example of not putting your money where your mouth is.

What it comes down to is the developer – actually, any businessman – will externalize any cost he can.  And so if he can shift the drop in value of houses from himself (who, after all, caused the decrease) to the neighbors, why wouldn’t he?  It just makes good business, at least in the short run.

The harder issue is why the government is so careless with the welfare of its citizens.  The best defense is that they don’t want the sales of all these homes to be consummated at what will surely be lower and very visible prices, thus killing the tax base.  Like businesses, governments will externalize costs and defend revenue streams. Another defense is that wind turbines represent a greater social good.  Even if that assertion were true (and there’s a lot of evidence that it is not) should not the society who benefits carry the cost?

While the developers and governments protect their interests, somehow forgotten is the truly significant effect on the unlucky neighbors.  There have been any number of reports (see Nissenbaum and Mars Hill, for example) where pretty much everyone around wants to move, but can’t because they cannot afford to abandon their homes.  This is a truly dreadful position for anyone to be put in, and that people, through no fault of their own, are put in this position for the benefit of a profit-making business is just shameful.

One thought on “Buyouts are an easy fix”

  1. Regarding your April 18 comments on buy outs as a fix: You are absolutely correct, on every point you made. The only thing I would add is that people who do not want to move,….at least not immediately,…..should be fairly compensated for the negative impact of these projects on their property values. I have discussed this in great detail at numerous zoning hearings on behalf of affected home owners, and have illustrated the fiscal impact on wind farm projects, (which is de minimis) in my appraisal review of the LBNL report. See McCann Apraisal, LLC review of LBNL property value study.

    I anticipate a series of “regulatory taking” inverse condemnations suits being filed, as more and more homeowners find their equity evaporating due to zoning approval for wind farms. And since wind “rights” are recognized in easement agreements from developers as well as in some states, the condition of a physical invasion or tresspass seems to be met, from a real estate perspective, to allow suits to have a valid claim. Especially when the use of those wind rights also results in close proximity to the noisy machines and has a direct relationship to reducing values. Sooner or later, class action suits are going to be commonplace, since developers don’t avoid groups of 25 or more, who will be and are similarlly affected.

    If they would simply use fair buy out criteria, a lot of messy, expensive, legal gymnastics could be avoided and, more importantly, many thousands of people would not have their lives disrupted so extensively and needlessly..


    Michael S. McCann
    McCann Appraisal, LLC

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