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Estimating the effects of wind loss mitigation on home value

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  • Sebastain Awondo
  • Harris Hollans
  • Lawrence Powell
  • Chip Wade

Abstract

We empirically estimate the effects of windstorm loss mitigation features on the value of coastal homes using fixed‐effects and spatial regression hedonic models. We use housing data from the “Fortified Home” program, which prescribes and certifies windstorm resilience features for residential property. We test the extent to which Fortified construction and the location of a house relative to the coast act as mitigation complements or substitutes. We find that on average homebuyers located at median distance to the coast pay a 6%–7% premium for Fortified homes, which exceeds the typical cost of building or retrofitting houses to the Fortified standard. Fortified construction and distance of the house from the coast are mitigation substitutes. The premium is highest for homes nearest the coast. Our findings are robust under various specifications of spatial hedonic models.

Suggested Citation

  • Sebastain Awondo & Harris Hollans & Lawrence Powell & Chip Wade, 2023. "Estimating the effects of wind loss mitigation on home value," Southern Economic Journal, John Wiley & Sons, vol. 90(1), pages 71-89, July.
    • Handle: RePEc:wly:soecon:v:90:y:2023:i:1:p:71-89
    DOI: 10.1002/soej.12648
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    1. Qiqi Li & Wei Wang & Yiying Zhang, 2024. "Self-protection and insurance demand with convex premium principles," Papers 2411.19436, arXiv.org.
    2. Richard Peter, 2024. "The economics of self-protection," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 49(1), pages 6-35, March.

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