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Optimal real estate capital durability and localized climate change disaster risk

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  • Bunten, Devin
  • Kahn, Matthew E.

Abstract

The durability of the real estate capital stock could hinder climate change adaptation because past construction anchors the population in beautiful and productive but increasingly-risky coastal areas. However, coastal developers anticipate that their assets face increasing risk and this creates an incentive to seek adaptation strategies. This paper models climate change as a joint process of (1) increasingly destructive storms and (2) a risk of sea-level rise that submerges coastal property. We study how forward-looking developers and real estate investors respond to the new risks along a number of dimensions including their choices of location, capital durability, capital mobility (modular real estate), and maintenance of existing properties. The net effect of such investments is a more resilient urban population.

Suggested Citation

  • Bunten, Devin & Kahn, Matthew E., 2017. "Optimal real estate capital durability and localized climate change disaster risk," Journal of Housing Economics, Elsevier, vol. 36(C), pages 1-7.
    • Handle: RePEc:eee:jhouse:v:36:y:2017:i:c:p:1-7
    DOI: 10.1016/j.jhe.2017.01.004
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    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. A Quick Economic Evaluation of Jim Hansen's Predictions About Our Urban Future
      by Matthew Kahn in Environmental and Urban Economics on 2017-07-15 18:34:00
    2. No Mention of General Equilibrium Effects in The Economist Magazine!
      by Matthew Kahn in Environmental and Urban Economics on 2017-07-13 23:43:00
    3. Sane Discussion of Disaster Adaptation in the NY Times
      by Matthew Kahn in Environmental and Urban Economics on 2017-09-30 22:55:00
    4. A Quick Summary of My Published Work in 2017
      by Matthew Kahn in Environmental and Urban Economics on 2017-12-20 19:39:00
    5. How Does Durable Capital Inhibit Urban Technology Upgrades?
      by Matthew Kahn in Environmental and Urban Economics on 2018-02-25 18:08:00
    6. Is Oakland "Inconsistent" as it Sues Fossil Fuel Companies While Downplaying Climate Risk in its Municipal Bond Prospectus?
      by Matthew Kahn in Environmental and Urban Economics on 2018-02-03 16:33:00
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      by Matthew Kahn in Environmental and Urban Economics on 2018-10-27 15:24:00
    8. Climate Change Adaptation in a Spatial Economy
      by Matthew E. Kahn in Environmental and Urban Economics on 2020-11-26 16:10:00
    9. How Does Applied Microeconomic Research Accelerate Climate Change Adaptation?
      by Matthew E. Kahn in Environmental and Urban Economics on 2021-05-13 14:39:00
    10. Week in review – science edition
      by ? in Climate Science on 2021-06-06 22:07:30
    11. Week in review – science edition
      by ? in Iowa Climate on 2021-06-06 18:36:51
    12. Week in review – science edition
      by ? in Climate Etc. on 2021-06-06 18:20:48

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    2. Laura A. Bakkensen & Lint Barrage, 2017. "Flood Risk Belief Heterogeneity and Coastal Home Price Dynamics: Going Under Water?," NBER Working Papers 23854, National Bureau of Economic Research, Inc.
    3. Donadelli, Michael & Grüning, Patrick & Jüppner, Marcus & Kizys, Renatas, 2021. "Global temperature, R&D expenditure, and growth," Energy Economics, Elsevier, vol. 104(C).
    4. Seung Kyum Kim, 2020. "The Economic Effects of Climate Change Adaptation Measures: Evidence from Miami-Dade County and New York City," Sustainability, MDPI, vol. 12(3), pages 1-19, February.
    5. Barrage, Lint & Furst, Jacob, 2019. "Housing investment, sea level rise, and climate change beliefs," Economics Letters, Elsevier, vol. 177(C), pages 105-108.
    6. Kahn, Matthew E. & Zhao, Daxuan, 2018. "The impact of climate change skepticism on adaptation in a market economy," Research in Economics, Elsevier, vol. 72(2), pages 251-262.
    7. Justin Tyndall, 2023. "Sea Level Rise and Home Prices: Evidence from Long Island," The Journal of Real Estate Finance and Economics, Springer, vol. 67(4), pages 579-605, November.
    8. Boustan, Leah Platt & Kahn, Matthew E. & Rhode, Paul W. & Yanguas, Maria Lucia, 2020. "The effect of natural disasters on economic activity in US counties: A century of data," Journal of Urban Economics, Elsevier, vol. 118(C).
    9. Pierre Magontier, 2020. "Does media coverage affect governments preparation for natural disasters?," Diskussionsschriften credresearchpaper29, Universitaet Bern, Departement Volkswirtschaft - CRED.
    10. Dylan E. McNamara & Martin D. Smith & Zachary Williams & Sathya Gopalakrishnan & Craig E. Landry, 2024. "Policy and market forces delay real estate price declines on the US coast," Nature Communications, Nature, vol. 15(1), pages 1-16, December.
    11. Wieteska-Rosiak Beata, 2020. "Real Estate Sector in the Face of Climate Change Adaptation in Major Polish Cities," Real Estate Management and Valuation, Sciendo, vol. 28(1), pages 51-63, March.
    12. Olabi, A.G. & Obaideen, Khaled & Elsaid, Khaled & Wilberforce, Tabbi & Sayed, Enas Taha & Maghrabie, Hussein M. & Abdelkareem, Mohammad Ali, 2022. "Assessment of the pre-combustion carbon capture contribution into sustainable development goals SDGs using novel indicators," Renewable and Sustainable Energy Reviews, Elsevier, vol. 153(C).

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    More about this item

    Keywords

    Capital durability; Climate change; Risk;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • R39 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other

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