Disaster-Induced Displacement: Effects on Destination Housing Prices

17 Pages Posted: 24 Jan 2021

See all articles by Madeleine Daepp

Madeleine Daepp

Microsoft Corporation - Microsoft Research - Redmond

devin michelle bunten

MIT

Date Written: November 30, 2020

Abstract

Hurricane Katrina displaced more United States residents than any disaster since the Dust Bowl. Approximately 1 in 5 New Orleans residents relocated to Texas, moving from a majority Black city to places in which no group predominates. The arrival of Katrina survivors led to documented changes in local schools and labor markets; the Katrina diaspora’s effect on housing markets, however, remains understudied. What effect should we expect? In-migration constitutes an increase in demand, pushing prices up—but existing residents may have a preference for segregation, leading them to decrease their own demand for affected neighborhoods. In this paper, we assess the effect of large flows of Katrina survivors from New Orleans on housing prices in Texas neighborhoods. Recognizing that associations could reflect selection on the part of survivors, who might be attracted to neighborhoods with declining prices, we construct an instrument for survivor in-flows using the destinations of pre-Katrina movers. We find that neighborhoods with larger inflows of survivors see slower house price growth, even after controlling for neighborhood characteristics and differences between cities. The house price effect is persistent: five years after Hurricane Katrina, we estimate that the neighborhoods receiving the largest in-flows of displaced people saw approximately 7.5% lower housing price growth in comparison with similar neighborhoods where no survivors relocated. Finally, we show that effects are concentrated in places that received economically disadvantaged movers or movers from predominantly Black neighborhoods of New Orleans. Altogether, these findings are consistent with the hypothesis that existing residents have a demand for segregation vis-a-vis Katrina survivors. As climate change makes large disaster-induced population flows increasingly common, there is a critical need for further research on how to ameliorate the costs of these large relocations, both for the individuals who must relocate and for the places in which they resettle.

Keywords: Residential Mobility, Disaster-Induced Displacement, Hurricane Katrina, Housing Prices, Re- gional Migration

JEL Classification: R21, R23, R31

Suggested Citation

Daepp, Madeleine and bunten, devin michelle, Disaster-Induced Displacement: Effects on Destination Housing Prices (November 30, 2020). Available at SSRN: https://ssrn.com/abstract=3740093 or http://dx.doi.org/10.2139/ssrn.3740093

Madeleine Daepp (Contact Author)

Microsoft Corporation - Microsoft Research - Redmond ( email )

Building 99
Redmond, WA
United States

Devin michelle Bunten

MIT

77 Massachusetts Avenue
Cambridge, MA 02139
United States

HOME PAGE: http://www.devinbunten.com

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