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A City under Water: A Geospatial Analysis of Storm Damage, Changing Risk Perceptions, and Investment in Residential Housing

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  • Shawn J. McCoy
  • Xiaoxi Zhao

Abstract

We examine the relationships between hurricanes, flood risk saliency, and residential property investment. Our analysis utilizes data detailing capital investment projects in homes matched to spatial data delineating the locations of structures damaged by Hurricane Sandy. Utilizing a difference-in-differences estimation strategy, we estimate a significant increase in the probability a homeowner invests in a damaged building located in a flood risk area. However, we fail to detect a statistically significant change in the rate of investment among damaged properties outside of these areas. We investigate the mechanisms through which a hurricane may influence households’ perceptions of risk by modeling changes in investment between properties in and out of flood risk zones restricting attention to the set of structures that failed to experience any storm damage. Model results suggest that while a recent storm may increase perceived risks, the spatial path of storm damage is an important mechanism driving these changes.

Suggested Citation

  • Shawn J. McCoy & Xiaoxi Zhao, 2018. "A City under Water: A Geospatial Analysis of Storm Damage, Changing Risk Perceptions, and Investment in Residential Housing," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 5(2), pages 301-330.
    • Handle: RePEc:ucp:jaerec:doi:10.1086/695611
    DOI: 10.1086/695611
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    Citations

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    Cited by:

    1. McCoy, Shawn J. & Walsh, Randall P., 2018. "Wildfire risk, salience & housing demand," Journal of Environmental Economics and Management, Elsevier, vol. 91(C), pages 203-228.
    2. Box-Couillard, Sebastien & Xu, Yilan, 2022. "The Effect of Flood Insurance on Property Values after a Flood," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322191, Agricultural and Applied Economics Association.
    3. Xie, Yang & Zilberman, David, 2018. "Implications of Spatial Externality of Flood Control: Land Reclamation, Wetland Reservation, and Investment in Flood Control Facilities," 2018 Annual Meeting, August 5-7, Washington, D.C. 274445, Agricultural and Applied Economics Association.
    4. Barrage, Lint & Furst, Jacob, 2019. "Housing investment, sea level rise, and climate change beliefs," Economics Letters, Elsevier, vol. 177(C), pages 105-108.
    5. Petkov, Ivan & Ortega, Francesc, 2024. "Flood Risk and Insurance Take-up in the Flood Zone and Its Periphery," IZA Discussion Papers 16922, Institute of Labor Economics (IZA).
    6. Justin Tyndall, 2023. "Sea Level Rise and Home Prices: Evidence from Long Island," The Journal of Real Estate Finance and Economics, Springer, vol. 67(4), pages 579-605, November.
    7. Matthew Gibson & Jamie T. Mullins & Alison Hill, 2019. "Climate Risk and Beliefs: Evidence from New York Floodplains," Department of Economics Working Papers 2019-02, Department of Economics, Williams College.
    8. Cohen, Jeffrey P. & Barr, Jason & Kim, Eon, 2021. "Storm surges, informational shocks, and the price of urban real estate: An application to the case of Hurricane Sandy," Regional Science and Urban Economics, Elsevier, vol. 90(C).
    9. Nicholas Apergis, 2020. "Natural Disasters and Housing Prices: Fresh Evidence from a Global Country Sample," International Real Estate Review, Global Social Science Institute, vol. 23(2), pages 815-836.
    10. Ortega, Francesc & Taṣpınar, Süleyman, 2018. "Rising sea levels and sinking property values: Hurricane Sandy and New York’s housing market," Journal of Urban Economics, Elsevier, vol. 106(C), pages 81-100.
    11. Ren, Yongwang, 2022. "The Spillover Effect of The Community Rating System," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322071, Agricultural and Applied Economics Association.
    12. Nicholas Apergis, 2020. "Natural Disasters and Housing Prices: Fresh Evidence from a Global Country Sample," International Real Estate Review, Global Social Science Institute, vol. 23(2), pages 189-210.
    13. Boslett, Andrew & Hill, Elaine, 2019. "Shale gas transmission and housing prices," Resource and Energy Economics, Elsevier, vol. 57(C), pages 36-50.
    14. Eric C. Edwards & Todd Guilfoos, 2021. "The Economics of Groundwater Governance Institutions across the Globe," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 43(4), pages 1571-1594, December.
    15. Wolf, David & Takeuchi, Kenji, 2022. "Holding back the storm: Dam capitalization in residential and commercial property values," Journal of Environmental Economics and Management, Elsevier, vol. 116(C).
    16. Graff Zivin, Joshua & Liao, Yanjun & Panassié, Yann, 2023. "How hurricanes sweep up housing markets: Evidence from Florida," Journal of Environmental Economics and Management, Elsevier, vol. 118(C).
    17. David Wolf & Kenji Takeuchi, 2022. "Who Gives a Dam? Capitalization of Flood Protection in Fukuoka, Japan," Discussion Papers 2203, Graduate School of Economics, Kobe University.
    18. Gibbons, Stephen & Heblich, Stephan & Timmins, Christopher, 2021. "Market tremors: Shale gas exploration, earthquakes, and their impact on house prices," Journal of Urban Economics, Elsevier, vol. 122(C).
    19. Wesley Burnett, J. & Mothorpe, Christopher, 2021. "Human-induced earthquakes, risk salience, and housing values," Resource and Energy Economics, Elsevier, vol. 63(C).
    20. Wang, Haoluan, 2021. "Flood Your Neighbors: Spillover Effects of Levee Building," 95th Annual Conference, March 29-30, 2021, Warwick, UK (Hybrid) 311091, Agricultural Economics Society - AES.

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