Do Conservation Easements Reduce Land Prices?

Throughout the United States, converting private properties to protected conservation easements is becoming ever more popular.

Properties that have been established as conservation easements often go down in price value. This is due to the permanent restrictions placed on the property in regards to any further development the landowner wants to pursue.

For many real estate tycoons and investors, properties with land conservation easements are generally not an appealing purchase, as the limitations placed on them hinder the prospect of financial gain. On the other hand, individuals on the market who have a smaller budget for a home and those who simply enjoy living in a place that is surrounded by nature, find the price drop of conservation easements to be a win-win.

The conservation easement is determined by an appraiser from the Energy and Environmental Affairs or by a non-profit land trust organization. When owned by the government, the Treasury Departments’ qualifications for conservation easements are overseen by the Internal Revenue Service.

‍How the Price is Determined

When determining the cost of common lands, appraisers traditionally analyze the location of the property in relation to urban neighborhoods or the natural aesthetics of the area that a buyer on the market would find appealing. While the properties with conservation easements often have a natural beauty to them, it’s not the aesthetics that end up determining their price.

Since the entire purpose of a conservation easement is to establish a protected area that is free from invasive human development, the cost is determined based on the environmental qualities of the property. This is why conservation land prices can greatly fluctuate based on how substantial of an ecological impact development will have on the local environment.

If the conservation land being assessed has a significant impact on the local resources or ecology of the area, properties can end up becoming extremely valuable and pricey. Whereas if the property has only a minor impact on its local environment, the cost of the conservation land will, in turn, be quite low.

That’s why individuals interested in purchasing property under this classification should carefully consider all environmental aspects of the conservation easement when determining the price of their land.

Let’s take a look at the land features that decide the value of a conservation easement.

Habitat

One of the most vital factors that influence the cost of a conservation easement is the health of the local habitat, as well as the level of endangerment of local species. That’s why property owners who have retained land that has stayed in a preserved natural state end up getting a considerably high price for the conservation land.

In addition, the land will have been surveyed and analyzed through an environmental impact inspection. If the inspection leads the appraiser to believe that the local habitat is vital for an at-risk or endangered local species, the price value of the property will also stay significantly high after the conservation easement has been set in place.

However, if property doesn’t have a vital habitat or an abundance of species, the price of the conservation land is significantly reduced. Individuals that are seeking an affordable home on the market typically aim to find a property that doesn’t have endangered or vital habitats.

Resources

Properties that have conservation easements often have a significant or vital resource for the local community or for the environment.

During the environmental impact report, a land conservation appraiser will have assessed the quality of these resources, which will end up greatly influencing the overall cost of the land.

Given that the United States has experienced the major repercussions that come with environmental catastrophes such as land degradation and pollution, the conservation land’s natural resources in relation to the development restriction on the land play a huge role in cost determination.

Let’s take a look at the common resources often associated with conservation easements.

Fresh Waterways

Freshwater is a resource that is becoming more and more scarce on a global and national level. This is why land trusts and environmental institutions put a high value on protecting and preserving this limited resource through conservation easements.

We see this done not only for the sake of habitat protection but also because these waterways are often the fundamental supply of water for a local community, town, or even city. A conservation easement with fresh waterways typically has them in the form of:

• Streams
• Rivers
• Ponds
• Lakes
• Wetlands

With climate change becoming a larger threat to our global environment, wildfires increasing in size and consistency, and the risk of water shortages becoming a greater risk to the population, appraisers highly consider the value of the property’s freshwater ways when determining the cost of the conservation easement.

Soil Fertility

The aftermath of rampant large-scale industrial farming has led to a massive amount of soil infertility throughout our lands. This has jeopardized our nation’s most valuable resource for food production.

That is why appraisers always check the fertility of the soil when considering the final price of a conservation easement. The United States government, as well as various land trusts, have seen the value of protecting fertile lands for potential food production in the future.

This investment secures a land resource that could easily have been bought out by a corporate farm that lacks environmental values. That is why some conservation easements can be found on the lands that don’t have an appearance of environmental value on the surface but do beneath the ground.

With that being said, conservation lands that have fertile soil are generally a safer bet for price reductions, as the landscapes usually don’t have other significant environmental attributes.

Development Limitations

The most common reason for price reductions associated with conservation easements stems from the limitations for development projects. The scale of these limitations, however, can greatly vary from property to property and can be extremely restrained, or can be quite flexible depending on the environmental value of the land.

Conservation easements that have a critical habitat or resource will generally be next to impossible to modify or develop. Essentially, these lands are bought in the state they were purchased in and are to remain untouched from any invasive human activity.

These restrictions can benefit the buyer in some situations, as they contribute to the overall price of the land. The common limitations placed on conservation easements are:

• Fencing - property owners may not be allowed to set up additional fencing on their land
• Additional buildings & structures - additional developments such as homes, sheds, decks, and other structures will likely be prohibited.
• Property division - owners will not be allowed to divide their property into separate lands for rent or sale.
• Natural alterations - the property owner may not be allowed to cut trees, shrubs, or other types of vegetation.

If a landowner is not concerned with development projects and is content with the natural state of their property, a conservation easement with strict limitations can result in a cheaper plot of land.