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Tornado shelters and the housing market

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  • Kevin Simmons
  • Daniel Sutter

Abstract

Mitigation against natural hazards often involves long-lived, immobile investments. Home owners must be able to capture the present value of future benefits to equate the private and societal return on mitigation. The capitalization of mitigation into home prices thus is crucial for home owners to have a proper incentive for mitigation. We investigate the existence of a premium for tornado shelters using home sales in Oklahoma City, where the deadly tornado outbreak of 3 May 1999 and the Oklahoma Saferoom Initiative increased public awareness of tornado shelters. We find that a shelter increases the sale price of a home by 3.5% to 4% or approximately $4200 given the mean price of homes sold in 2005. The magnitude of the premium is plausible given that shelters retail for $2500-$3000 installed.

Suggested Citation

  • Kevin Simmons & Daniel Sutter, 2007. "Tornado shelters and the housing market," Construction Management and Economics, Taylor & Francis Journals, vol. 25(11), pages 1119-1126.
    • Handle: RePEc:taf:conmgt:v:25:y:2007:i:11:p:1119-1126
    DOI: 10.1080/01446190701618299
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    References listed on IDEAS

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    Cited by:

    1. Stephen M. Strader & Walker S. Ashley & Thomas J. Pingel & Andrew J. Krmenec, 2017. "Projected 21st century changes in tornado exposure, risk, and disaster potential," Climatic Change, Springer, vol. 141(2), pages 301-313, March.
    2. Dean Gatzlaff & Kathleen McCullough & Lorilee Medders & Charles M. Nyce, 2018. "The Impact of Hurricane Mitigation Features and Inspection Information on House Prices," The Journal of Real Estate Finance and Economics, Springer, vol. 57(4), pages 566-591, November.
    3. Cheung, Ron & Wetherell, Daniel & Whitaker, Stephan, 2018. "Induced earthquakes and housing markets: Evidence from Oklahoma," Regional Science and Urban Economics, Elsevier, vol. 69(C), pages 153-166.

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