Since the mid 1990s, bio-fuel producers have built more than 130 ethanol plants across the United States, the majority of which have been placed in the upper Midwest. While politicians and the industry have praised the positive effects of ethanol facilities, it is important to explore the potential negative impacts. This study examines one negative effect that is not yet fully understood: the impact ethanol plants have on the value of residential property located near a new ethanol facility. To meet this objective, sales data for residential properties sold between 1999 and 2009 from two ethanol communities in Michigan and the hedonic method are used to evaluate the impact on property values over time and across homes in each community. Use of sales data over this ten-year period provides a unique analysis as it enables a comparison of properties pre- and post- plants coming on line. Furthermore, use of pre- and post-plant sales data provides greater confidence that any observed negative effect is truly the result of the ethanol plant and not some pre-existing, unobserved factor. Conclusions confirm that ethanol plants may have large negative effects, depressing the value of homes as much as 18% and as far as two miles away. However, these results may not be universal as conditions, tastes, and preferences differ across space and time.
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