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Do house prices reflect climate change adaptation? Evidence from the city on the water

Author

Listed:
  • Matteo Benetton

    (Haas School of Business, University of California, Berkeley)

  • Simone Emiliozzi

    (Bank of Italy)

  • Elisa Guglielminetti

    (Bank of Italy)

  • Michele Loberto

    (Bank of Italy)

  • Alessandro Mistretta

    (Bank of Italy)

Abstract

Investment in adaptation is a critical strategy to reduce the damages from climate change, yet there is limited evidence about its effectiveness and costs. We exploit the activation of a sea wall to protect the city of Venice from increasingly high tides to provide new evidence on the capitalization of infrastructure investment in climate change adaptation into housing values. Exploiting variation in the activation of the sea wall -- based on expected tides -- as well as in the exposure of different properties - based on characteristics (ground vs higher floors, stilts elevation) - we find that the sea wall increases house prices by 3% for properties above the activation threshold and by an additional 7% for ground-floor properties. Overall, one year after the activation the sea wall generated a 4.5% increase in the value of the total residential housing stock in Venice, that is a lower bound on the total welfare gains generated by this infrastructure.

Suggested Citation

  • Matteo Benetton & Simone Emiliozzi & Elisa Guglielminetti & Michele Loberto & Alessandro Mistretta, 2022. "Do house prices reflect climate change adaptation? Evidence from the city on the water," Questioni di Economia e Finanza (Occasional Papers) 735, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:opques:qef_735_22
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    File URL: https://www.bancaditalia.it/pubblicazioni/qef/2022-0735/QEF_735_22.pdf
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    Cited by:

    1. Michele Loberto & Matteo Spuri, 2023. "The impact of flood risk on real estate wealth in Italy," Questioni di Economia e Finanza (Occasional Papers) 768, Bank of Italy, Economic Research and International Relations Area.
    2. Michele Loberto & Alessandro Mistretta & Matteo Spuri, 2023. "The capitalization of energy labels into house prices. Evidence from Italy," Questioni di Economia e Finanza (Occasional Papers) 818, Bank of Italy, Economic Research and International Relations Area.

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    More about this item

    Keywords

    housing; climate change; adaptation; infrastructure;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures

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