Does Flood Insurance Help Neighborhoods Recover from Flooding?

Abstract

This study investigates the impact of flood insurance on neighborhood recovery following flooding events. Utilizing a shift-share instrumental variable approach, we assess the influence of flood insurance claims on housing prices in the aftermath of Hurricane Harvey in the Houston area. Our analysis reveals that flood insurance claims at the census-tract level have a significant protective effect on housing prices. For every $1,000 increase in claims per single-family household in a census-tract, housing prices increase by 1.4%, which is equivalent to $3,080 given the median housing value of $220,000 in the sample. We find that while the median flooded homeowner in affected tracts experiences a 1.7% decrease in housing values after a flood, homeowners in neighborhoods at the 75th percentile of flood insurance claims see no such decrease. Additionally, we observe substantial positive spillover effects of flood insurance claims on the prices of nearby uninsured homes. We further explore potential mechanisms driving these outcomes and uncover suggestive evidence that, post-Harvey, homes listed for sale in well-insured tracts are less likely to be foreclosed properties, more likely to have done home remodeling, and tend to command higher listing prices.

Click the Slides button above to demo Academic’s Markdown slides feature.

#Supplementary notes can be added here, including code and math.

Sébastien Box-Couillard
Sébastien Box-Couillard
Ph.D. Candidate in Applied Economics

I am a Ph.D. candidate in Agricultural and Consumer Economics at the University of Illinois Urbana-Champaign. My research interests lie at the intersection of environmental and urban economics. I am particularily interested in interactions between inequality, discrimination, housing markets and natural disasters.

Related