Lab Seminar - Unpriced flood risk in the US housing market
This week Jesse Gourevitch presented his work estimating the unpriced flood risk in the US housing market. He and his collaborators combined climate models that predict changes in flood risk with housing market data to identify the extent to which information about flooding is incorporated into market prices. Using these data they estimate that residential properties in the United States exposed to flood risk are overvalued by $121-237 billion dollars. This overvaluation exposes many communities to the possibility of their homes declining in value if flood risk becomes more accurately reflected in the market. These risks are unevenly distributed across the country; coastal communities and states without flood risk disclosure laws have the highest rates of overvaluation. Furthermore, Low-income and non-white households are disproportionately affected. Whether or not these disparities result in inequitable outcomes will depend on the ability and will of policymakers to answer challenging political questions of who should bear the costs of climate change.