ACCI Conference 2024

This study investigates the impact of flood insurance on neighborhood recovery following flooding events. Utilizing a shift-share instrumental variable approach, we assess the influence of flood insurance claims on housing prices in the aftermath of Hurricane Harvey in the Houston area. Our analysis reveals that flood insurance claims at the census-tract level have a significant protective effect on housing prices. Specifically, we find that while the median homeowner in affected tracts experiences a 2.4\% decrease in housing values after a flood, homeowners in neighborhoods at the 75th percentile of flood insurance claims see no such decrease. Additionally, we observe substantial positive spillover effects of flood insurance claims on the prices of nearby uninsured homes. We further explore potential mechanisms driving these outcomes and uncover suggestive evidence that post-Harvey homes listed for sale in well-insured tracts are less likely to be foreclosed properties, more likely to have done home remodeling, and tend to command higher listing prices. Notably, our analysis of housing supply and demand metrics does not indicate significant market condition shifts in more insured tracts.

Author(s): Sebastien Box-Couillard, Yilan Xu