Research Report: Broadband Availability Raises Market Value of Rural Houses
A first-of-its-kind study finds that houses where broadband is available are worth more on the market than houses without broadband availability. But the returns for “super-fast” speeds are lower than those for just having some type of faster Internet access available.
Every semester that I teach my rural economic development class at Oklahoma State University, I ask how many students would move to an area without broadband access. Zero hands go up. Rural residents have a lot to gain from broadband, including becoming civically engaged, reducing social isolation, and even income generation. It seems obvious – rural houses with good internet access should be worth more. But few studies have tried to put a number on how much rural housing value increases for those that have access.
Our new study changes that. We used 2016 data from all 887 “remote rural” U.S. counties – those that are not adjacent to a metropolitan area – and combined it with broadband availability data. Our aggregate dataset included each county’s median housing value, various housing characteristics (percent of mobile homes; percent with eight rooms or more; percent built before 1939 and after 2010, percent used for seasonal or recreational use, etc.), growth rates in income and employment, distance to a metropolitan county with 250,000 population or more, and the percentage of households with access to a variety of wired broadband speeds (through fixed technologies like fiber, cable, DSL, or fixed wireless – but not satellite). We then used a methodology that allows us to simultaneously estimate broadband’s impact on housing value and the reverse possibility – that housing value helps determine broadband availability.
The data shows that while 94% of the houses in these remote rural counties had access to download speeds of 200 kilobits per second (kbps), only 63% had access to the official FCC broadband definition of 25 megabits per second (Mbps). Even fewer had access to 100 Mbps (38%) or 1,000 Mbps (9%). Note that the 200 kbps statistic means that even as of 2016, an average of 6% of houses in remote rural counties lacked any kind of fixed internet availability outside of dial-up.
The results showed that rural housing value was significantly impacted by factors we might have predicted. There were positive relationships with the percent of seasonal/recreational houses in a county and in the percent built later than 2010; and negative relationships with the percentage of mobile homes and the distance to a metropolitan county with 250,000 population. The more interesting result, however, was for the broadband characteristics. The biggest and strongest positive relationships were found for the slower download speeds – 200 kbps, 4 Mbps, 10 Mbps, and 25 Mbps. No statistically significant relationships were found for speeds of 250 Mbps or 1,000 Mbps.
What did our findings say about the value to a typical house? We estimate that a 10% increase in the percentage of residents with access to 200 kbps would increase the average housing value by $661 in that county. Estimates for faster speeds are somewhat lower, around $230 – $250 for 10 – 25 Mbps. These may not seem like massive numbers, but when applied to the average number of households in each county, they add up to significant increases in property values, which would likely have meaningful impacts on county property tax collections. We estimate that annual property tax collections could increase from $25,000 – $65,000 in these counties, which could be significant for rural areas that often struggle to fund local services.
We are not sure why the higher-speed networks failed to have a measurable relationship with rural housing values. One likely reason is that such networks are relatively new (with most coming post-2015), and the housing values have not yet had time to respond to their availability. It is also possible that rural residents simply value the ability to have “some” connection more than having a super-fast one. While this is something to keep an eye on as these higher-speed networks grow, for now we at least have some documentation that broadband does in fact matter for rural housing values.
Brian Whitacre is a Sarkeys Distinguished Professor and Steven Deller is a professor at Oklahoma State University and the University of Wisconsin-Madison, respectively. Their study was recently published in Papers in Regional Science and is entitled “Broadband’s Relationship to Rural Housing Values.”