Excess vulnerability from subsidized flood insurance: Housing market adaptation when premiums equal expected flood damage

Scott J. Colby, Katherine Y. Zipp

Research output: Contribution to journalArticlepeer-review

Abstract

We calculate there are 8.1% more houses in Allegheny County, PA (Pittsburgh) due to flood insurance subsidies. Conversely, if/when National Flood Insurance Program (NFIP) premiums rise by 50% to equal expected damages, property values will decrease by 8.8% in the short-term, with about half of that recuperated in the long run (4.7%) as quality-adjusted housing stocks contract by 7.5% over decades. This analysis informs community planning and current NFIP revisions that strive to balance solvency and social consequences. Furthermore, our extension of Poterba's (1984) dynamic user-cost of housing model can be used in integrated assessment models of climate change adaptation.

Original languageEnglish (US)
Article number2050012
JournalClimate Change Economics
Volume12
Issue number1
DOIs
StatePublished - Feb 2021

All Science Journal Classification (ASJC) codes

  • Global and Planetary Change
  • Economics and Econometrics
  • Management, Monitoring, Policy and Law

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