Evaluating the Impact of Climate Disasters on Property Value: A Study on Hurricane Sandy, Grace Hong, UG '21, (2312439)
I study the impact of Hurricane Sandy on New Jersey home prices using a difference-in-differences and triple difference regression from 2009 to 2019, incorporating storm damage, National Flood Insurance Program (NFIP) payouts, and flood risk. My data is composed of zipcode level home prices from the Zillow Home Value Index. In addition, I section home prices into homes in aggregate and five bedroom homes; I also support my research with fieldwork. Overall, when treating for damage and NFIP alone, homes experience initial discounts that disappear over time or convert to price premiums after Sandy. However, when treating for flood risk alone or combining flood risk with damage or NFIP treatment, homes experience persistent price discounts. Notably, the exceptions to this trend are five bedroom homes that are high flood risk and have suffered high levels of damage; these homes experience consistent price premiums post-disaster. This result highlights unequal recovery, with more expensive properties, i.e. wealthier homeowners, being able to build back better. It also suggests that NFIP, which is mandatory in high flood risk areas and offered at below-market rates, may generate moral hazard by incentivizing continued restoration of expensive homes in high flood risk areas. These findings contribute to existing literature on the capitalization of flood risk into home prices, as well as the limited literature on Hurricane Sandy's effect on home prices in its hardest hit state: New Jersey.