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
Date Written: March 29, 2018
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: Suggested Citation