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Optimal real estate capital durability and localized climate change disaster risk

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  • Bunten, Devin
  • Kahn, Matthew E.

Abstract

The durability of the real estate capital stock could hinder climate change adaptation because past construction anchors the population in beautiful and productive but increasingly-risky coastal areas. However, coastal developers anticipate that their assets face increasing risk and this creates an incentive to seek adaptation strategies. This paper models climate change as a joint process of (1) increasingly destructive storms and (2) a risk of sea-level rise that submerges coastal property. We study how forward-looking developers and real estate investors respond to the new risks along a number of dimensions including their choices of location, capital durability, capital mobility (modular real estate), and maintenance of existing properties. The net effect of such investments is a more resilient urban population.

Suggested Citation

  • Bunten, Devin & Kahn, Matthew E., 2017. "Optimal real estate capital durability and localized climate change disaster risk," Journal of Housing Economics, Elsevier, vol. 36(C), pages 1-7.
  • Handle: RePEc:eee:jhouse:v:36:y:2017:i:c:p:1-7
    DOI: 10.1016/j.jhe.2017.01.004
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    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. No Mention of General Equilibrium Effects in The Economist Magazine!
      by Matthew Kahn in Environmental and Urban Economics on 2017-07-13 23:43:00
    2. A Quick Economic Evaluation of Jim Hansen's Predictions About Our Urban Future
      by Matthew Kahn in Environmental and Urban Economics on 2017-07-15 18:34:00
    3. Sane Discussion of Disaster Adaptation in the NY Times
      by Matthew Kahn in Environmental and Urban Economics on 2017-09-30 22:55:00
    4. A Quick Summary of My Published Work in 2017
      by Matthew Kahn in Environmental and Urban Economics on 2017-12-20 19:39:00
    5. Is Oakland "Inconsistent" as it Sues Fossil Fuel Companies While Downplaying Climate Risk in its Municipal Bond Prospectus?
      by Matthew Kahn in Environmental and Urban Economics on 2018-02-03 16:33:00
    6. How Does Durable Capital Inhibit Urban Technology Upgrades?
      by Matthew Kahn in Environmental and Urban Economics on 2018-02-25 18:08:00
    7. A Climate Change Investment Strategy
      by Matthew Kahn in Environmental and Urban Economics on 2018-10-27 15:24:00
    8. Climate Change Adaptation in a Spatial Economy
      by Matthew E. Kahn in Environmental and Urban Economics on 2020-11-26 16:10:00
    9. How Does Applied Microeconomic Research Accelerate Climate Change Adaptation?
      by Matthew E. Kahn in Environmental and Urban Economics on 2021-05-13 14:39:00
    10. Week in review – science edition
      by ? in Climate Etc. on 2021-06-06 18:20:48
    11. Week in review – science edition
      by ? in Climate Science on 2021-06-06 22:07:30
    12. Week in review – science edition
      by ? in Iowa Climate on 2021-06-06 18:36:51

    Citations

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    Cited by:

    1. Justin Tyndall, 2021. "Sea Level Rise and Home Prices: Evidence from Long Island," Working Papers 2021-2, University of Hawaii Economic Research Organization, University of Hawaii at Manoa.
    2. Laura A. Bakkensen & Lint Barrage, 2017. "Flood Risk Belief Heterogeneity and Coastal Home Price Dynamics: Going Under Water?," NBER Working Papers 23854, National Bureau of Economic Research, Inc.
    3. Seung Kyum Kim, 2020. "The Economic Effects of Climate Change Adaptation Measures: Evidence from Miami-Dade County and New York City," Sustainability, MDPI, Open Access Journal, vol. 12(3), pages 1-19, February.
    4. Kahn, Matthew E. & Zhao, Daxuan, 2018. "The impact of climate change skepticism on adaptation in a market economy," Research in Economics, Elsevier, vol. 72(2), pages 251-262.
    5. Barrage, Lint & Furst, Jacob, 2019. "Housing investment, sea level rise, and climate change beliefs," Economics Letters, Elsevier, vol. 177(C), pages 105-108.
    6. Pierre Magontier, 2020. "Does media coverage affect governments’preparation for natural disasters?," Working Papers 2020/05, Institut d'Economia de Barcelona (IEB).
    7. Wieteska-Rosiak Beata, 2020. "Real Estate Sector in the Face of Climate Change Adaptation in Major Polish Cities," Real Estate Management and Valuation, Sciendo, vol. 28(1), pages 51-63, March.
    8. Pierre Magontier, 2020. "Does media coverage affect governments’ preparation for natural disasters?," Diskussionsschriften credresearchpaper29, Universitaet Bern, Departement Volkswirtschaft - CRED.
    9. Boustan, Leah Platt & Kahn, Matthew E. & Rhode, Paul W. & Yanguas, Maria Lucia, 2020. "The effect of natural disasters on economic activity in US counties: A century of data," Journal of Urban Economics, Elsevier, vol. 118(C).
    10. Magontier, Pierre, 2020. "Does media coverage affect governments' preparation for natural disasters?," MPRA Paper 101291, University Library of Munich, Germany.

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    More about this item

    Keywords

    Capital durability; Climate change; Risk;
    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
    • R39 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other

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