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Natural Disasters and Neighborhood Choice: Evidence from Hurricane Harvey

The combination of climate change and economic growth in disaster-prone regions increasingly exposes the population to extreme weather events. While the aggregate impacts of disasters are well documented, much less is known about the individual responses to these environmental shocks. In this paper, I estimate the average treatment effects of household-level damage using a fuzzy regression discontinuity design in the context of Hurricane Harvey, which damaged more than 200,000 homes in Houston, Texas in 2017. I leverage the relationship between flooding and a home’s elevation, exploiting a discontinuous increase in damage from $0 to approximately $48,000 once water reaches the first floor. While residential mobility typically spikes after natural disasters, I find no evidence that flood damage causes homeowners to sell and move after Hurricane Harvey. If anything, damage decreases move propensity for multiple months. Although flooded households move at roughly the same rate as their non-flooded peers, I document a divergence in the location and type of housing selected by these movers. My results indicate that flood damage makes people more likely to move shorter distances and transition out of homeownership. Despite the combined shock to shelter and wealth, I find that flooded households are more likely to sort into higher-income census tracts in the aftermath of Hurricane Harvey. Given the importance of place-based spillover effects, the long-run welfare implications of suffering flood damage remain an open area of research.

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