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Excess Vulnerability From Subsidized Flood Insurance: Housing Market Adaptation When Premiums Equal Expected Flood Damage

Author

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  • SCOTT J. COLBY

    (107 Otis P. Marshall Hall, South St., Morrisville, NY 13408, USA)

  • KATHERINE Y. ZIPP

    (Department of Agricultural Economics, Sociology and Education, 112-F Armsby, University Park, PA 16802, USA)

Abstract

We calculate there are 8.1% more houses in Allegheny County, PA (Pittsburgh) due to flood insurance subsidies. Conversely, if/when National Flood Insurance Program (NFIP) premiums rise by 50% to equal expected damages, property values will decrease by 8.8% in the short-term, with about half of that recuperated in the long run (4.7%) as quality-adjusted housing stocks contract by 7.5% over decades. This analysis informs community planning and current NFIP revisions that strive to balance solvency and social consequences. Furthermore, our extension of Poterba’s (1984) dynamic user-cost of housing model can be used in integrated assessment models of climate change adaptation.

Suggested Citation

  • Scott J. Colby & Katherine Y. Zipp, 2021. "Excess Vulnerability From Subsidized Flood Insurance: Housing Market Adaptation When Premiums Equal Expected Flood Damage," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 12(01), pages 1-31, February.
    • Handle: RePEc:wsi:ccexxx:v:12:y:2021:i:01:n:s2010007820500128
    DOI: 10.1142/S2010007820500128
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