LETTER — The impact of the Ajax mine on property values

One of the big unknowns is the potential impact the Ajax mine will have on property values. Studies which examine the impact of open-pit mines on house prices are scarce probably because large mines typically aren’t built close to populated areas.

However, in Canada and the U.S., there are many gravel pits located close to urban areas and various studies have been conducted on their impact. One of the most rigorous studies is by Dr. Dianne Hite∗, an economist who has published widely in the field of property value impact analysis.

In a study completed during 1996-1998 in Delaware County, Ohio, Dr. Hite concluded that based on data from 2,552 residential properties located at a distance within 3 miles of a 250 acre gravel pit, proximity to the mine did have a significant impact on property values. The study indicated that houses located close to the mine could see a reduction of up to 30 percent in property value.

Furthermore, houses half a mile away would see a 20 percent reduction; houses one mile away, a 14.5 percent reduction; houses two miles away, an 8.9 reduction; and houses three miles away, a 4.9 percent reduction. While 4.9 percent does not seem like much, on a home worth $400,000, it amounts to a reduction of almost $20,000.

The above data was based on houses located at a distance at most three miles from a 250 acre gravel pit. One should keep in mind that gravel pits have a much smaller impact on the environment and carry far fewer risks than open-pit copper mines.

The proposed Ajax mine has an industrial footprint of about 6,000 acres, which is 24 times the size of the gravel pit considered in the Hite study. Based on the scale of the Ajax mine, it would be very likely that residential properties within a 5 mile (and perhaps larger) radius of the Ajax mine would suffer comparable losses.

The area affected covers much of south Kamloops, given that the distance from Ajax pit to downtown Kamloops is approximately 5 miles. Using percentages from the Hite report, even conservative estimates would indicate that the loss of property value could potentially be huge. For example, suppose one were to consider the portion of Aberdeen lying closest to mine, say within a 2 mile radius.

This would include properties bounded by Pacific Way, Aberdeen Drive, and Abbeyglen Way as well as many homes lying between Pacific Way and Van Horne Drive. There are more than 750 properties in this area. Based on the City of Kamloops’ property assessments, most of these properties have values in the $350,000 to $450,000 range. If one were take an average property value of $ 400,000, then based on a 8.9 percent loss (according to Hite), the average loss in property value is roughly $ 35,000. If you multiply this by 750, the total losses in this area alone would be at least $ 24.5 million.

Thousands of properties lie within a 5 mile radius of the Ajax pit. The above numbers indicate that the total loss in property value in Kamloops could easily exceed $100 million. While some may call this “fear mongering,” proponents of the mine should be aware that sound economic analysis involves looking at costs as well as benefits. Property value losses are only one of the many potential costs to Kamloops. With large-scale industrial developments near urban areas, there are going to be reprecussions. There is no free lunch.

∗ Dianne Hite, 2006, “Summary Analysis: Impact of Operational Gravel Pit on House Values”, Delaware County, Ohio, Auburn University.

SEAN McGUINNESS

Kamloops