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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

    Citations

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    Cited by:

    1. 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.
    2. repec:eee:reecon:v:72:y:2018:i:2:p:251-262 is not listed on IDEAS
    3. 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.

    More about this item

    Keywords

    Capital durability; Climate change; Risk;

    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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