Research
Research
Flood Risk Meets the Market: Coastal Housing Adaptation
Abstract: This paper examines how flood risk shapes housing markets in coastal Florida, one of the most vulnerable regions in the United States. Drawing on detailed property transactions, flood claims, and geospatial data, I analyze how households perceive and respond to flood risk and how these perceptions are reflected in property values. The study highlights the tradeoff between ocean amenity premiums and heightened exposure to flooding. By documenting misalignments between actual flood risk and market valuation, the paper reveals the welfare consequences of imperfect risk pricing, including distorted investment, misinformed household choices, and unequal exposure to climate hazards. These findings provide new evidence on the challenges of building climate resilient housing markets in the face of rising seas and intensifying natural disasters.
The Economics of Coastal Resilience to Storm Surge
with Robert O. Mendelsohn and Jonghyun Yoo
Abstract: This paper develops an Integrated Assessment Model (CRESS) of storms and sea level rise along urban coastlines. The theory section explains why the combination of fair insurance and seawalls suggest that the optimal strategy is to minimize the sum of the cost of a seawall plus the expected remaining flood damage. CRESS applies this theory to develop detailed optimal coastal resilience plans by integrating the probability distribution of storm surges, projections of sea level rise, the geography of urban landscapes, and the damage function from flooding. CRESS suggests that most coastal American cities need to immediately build relatively low seawalls (1.3 m) to protect existing urban structures. The location of these seawalls should be above the highest non-storm tide line and sometimes far from the shore. The combined cost of building seawalls plus fair insurance for the remaining flood risks is well below the current cost of national flood insurance alone.