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A City under Water: A Geospatial Analysis of Storm Damage, Changing Risk Perceptions, and Investment in Residential Housing

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  • Shawn J. McCoy
  • Xiaoxi Zhao

Abstract

We examine the relationships between hurricanes, flood risk saliency, and residential property investment. Our analysis utilizes data detailing capital investment projects in homes matched to spatial data delineating the locations of structures damaged by Hurricane Sandy. Utilizing a difference-in-differences estimation strategy, we estimate a significant increase in the probability a homeowner invests in a damaged building located in a flood risk area. However, we fail to detect a statistically significant change in the rate of investment among damaged properties outside of these areas. We investigate the mechanisms through which a hurricane may influence households’ perceptions of risk by modeling changes in investment between properties in and out of flood risk zones restricting attention to the set of structures that failed to experience any storm damage. Model results suggest that while a recent storm may increase perceived risks, the spatial path of storm damage is an important mechanism driving these changes.

Suggested Citation

  • Shawn J. McCoy & Xiaoxi Zhao, 2018. "A City under Water: A Geospatial Analysis of Storm Damage, Changing Risk Perceptions, and Investment in Residential Housing," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 5(2), pages 301-330.
    • Handle: RePEc:ucp:jaerec:doi:10.1086/695611
    DOI: 10.1086/695611
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