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Rising sea levels and sinking property values: Hurricane Sandy and New York’s housing market

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  • Ortega, Francesc
  • Taṣpınar, Süleyman

Abstract

This paper analyzes the effects of hurricane Sandy on the New York City housing market using a large parcel-level dataset that contains all housing sales for 2003–2017. The dataset also contains geo-coded FEMA data on which building structures were damaged by the hurricane and to what degree. Our estimates provide robust evidence of a persistent negative impact on flood zone housing values. We show the gradual emergence of a price penalty among flood zone properties that were not damaged by Sandy, reaching 8% in year 2017 and showing no signs of recovery. In contrast, damaged properties suffered a large immediate drop in value following the storm (17–22%), followed by a partial recovery and convergence toward a similar penalty as non-damaged properties. The partial recovery in the prices of damaged properties likely reflects their gradual restoration. However, the persistent price reduction affecting all flood-zone properties is more consistent with a learning mechanism. Hurricane Sandy may have increased the perceived risk of large-scale flooding episodes in that area.

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  • 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.
  • Handle: RePEc:eee:juecon:v:106:y:2018:i:c:p:81-100
    DOI: 10.1016/j.jue.2018.06.005
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    4. 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.
    5. Indaco, Agustín & Ortega, Francesc & Taspinar, Süleyman, 2018. "The Effects of Flood Insurance on Housing Markets," IZA Discussion Papers 11810, Institute of Labor Economics (IZA).
    6. Hein, Walter & Wilson, Clevo & Lee, Boon & Rajapaksa, Darshana & de Moel, Hans & Athukorala, Wasantha & Managi, Shunsuke, 2019. "Climate change and natural disasters: Government mitigation activities and public property demand response," Land Use Policy, Elsevier, vol. 82(C), pages 436-443.
    7. Mohammad Reza Farzanegan & Mehdi Feizi & Hassan F. Gholipour, 2019. "Drought and Property Prices: Empirical Evidence from Iran," MAGKS Papers on Economics 201916, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    8. Robert J. Johnston & Klaus Moeltner, 2019. "Special Flood Hazard Effects on Coastal and Interior Home Values: One Size Does Not Fit All," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 74(1), pages 181-210, September.
    9. Indaco, Agustín & Ortega, Francesc & Taspinar, Süleyman, 2019. "Hurricanes, Flood Risk and the Economic Adaptation of Businesses," IZA Discussion Papers 12474, Institute of Labor Economics (IZA).
    10. Ahmed Mohammed & Irina Harris & Anthony Soroka & Mohamed Naim & Tim Ramjaun & Morteza Yazdani, 2021. "Gresilient supplier assessment and order allocation planning," Annals of Operations Research, Springer, vol. 296(1), pages 335-362, January.
    11. Kakuho Furukawa & Hibiki Ichiue & Noriyuki Shiraki, 2020. "How Does Climate Change Interact with the Financial System? A Survey," Bank of Japan Working Paper Series 20-E-8, Bank of Japan.
    12. Abbie A. Rogers & Fiona L. Dempster & Jacob I. Hawkins & Robert J. Johnston & Peter C. Boxall & John Rolfe & Marit E. Kragt & Michael P. Burton & David J. Pannell, 2019. "Valuing non-market economic impacts from natural hazards," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 99(2), pages 1131-1161, November.
    13. Jesse M. Keenan & Jacob T. Bradt, 2020. "Underwaterwriting: from theory to empiricism in regional mortgage markets in the U.S," Climatic Change, Springer, vol. 162(4), pages 2043-2067, October.
    14. Daniel Aaronson & Scott A. Brave & R. Andrew Butters & Daniel Sacks & Boyoung Seo, 2020. "Using the Eye of the Storm to Predict the Wave of Covid-19 UI Claims," Working Paper Series WP-2020-10, Federal Reserve Bank of Chicago, revised 16 Apr 2020.
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    More about this item

    Keywords

    Climate change; Real estate; Cities; Hurricane Sandy;
    All these keywords.

    JEL classification:

    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • R33 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Nonagricultural and Nonresidential Real Estate Markets

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