Rising Sea Levels and Sinking Property Values: The Effects of Hurricane Sandy on New York's Housing Market

51 Pages Posted: 27 Nov 2017 Last revised: 12 Oct 2018

See all articles by Francesc Ortega

Francesc Ortega

City University of New York, CUNY Queens College - Department of Economics ; IZA Institute of Labor Economics

Suleyman Taspinar

CUNY Queens College, Department of Economics

Date Written: March 29, 2018

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. We believe that the partial recovery in the prices of damaged properties 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.

Keywords: Climate change, Real estate, Cities, Hurricane Sandy

JEL Classification: H56, K42, R33

Suggested Citation

Ortega, Francesc and Taspinar, Suleyman, Rising Sea Levels and Sinking Property Values: The Effects of Hurricane Sandy on New York's Housing Market (March 29, 2018). Available at SSRN: https://ssrn.com/abstract=3074762 or http://dx.doi.org/10.2139/ssrn.3074762

Francesc Ortega (Contact Author)

City University of New York, CUNY Queens College - Department of Economics ( email )

65-30 Kissena Blvd
Flushing, NY 11367-1597
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Suleyman Taspinar

CUNY Queens College, Department of Economics ( email )

Flushing, NY 11367
United States

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