Real Estate Damage Economics: The Impact of PFAS “Forever Chemicals” on Real Estate Valuation

Abstract

The so-called “Forever Chemicals,” i.e. PFAS or PFCs, are emerging environmental contaminants. They refer to a family of carbon-fluorine chemicals that were initially developed in the commercial and industrial sectors around the time of WWII. As the term PFAS is a catch-all, there are many individual compounds, including C8, PFOA, PFOS, AFFF, PFNA, PFHxS, and GenX. Until the late 1990s/early 2000s, the health risks of PFAS compounds were largely unknown to the general public. But with the increasing ability to detect and monitor these compounds in humans and the environment, information is now more widely available. Health advisories are being developed at federal and state levels as to the adverse human health effects associated with PFAS are becoming clearer. As public awareness and the ability to detect PFAS compounds evolve, so must real estate valuations. Real estate valuation professionals are facing assignments that require an evaluation of the impact, if any, of PFAS on property values, in particular, properties with tainted household water. This article outlines the fundamental characteristics of PFAS compounds and sets forth valuation methodologies, such as mass appraisal methodologies, that can be used to determine the impact, if any, PFAS have on real estate values. Appraisal literature and textbooks have established the use of regression for mass appraisal assignments. The profession has also developed numerous well-accepted methodologies that can also be used to address mass appraisal assignments. This article addresses the use of regression as a real estate valuation methodology, the use of sale/resale as a mass appraisal technique, and the use of a case study approach in environmental contamination assignments related to PFAS.