Disaster (over-)insurance: the long-term financial and socioeconomic consequences of Hurricane Katrina

Federal disaster insurance?in the form of national flood insurance, the Federal Emergency Management Agency (FEMA), and other programs?is designed to nationally-distribute large geography-specific shocks like earthquakes and hurricanes. This study examines the local longrun net impact of Hurricane Katrina and the subsequent policy response on impacted residents. Using a unique fifteen-year panel of five percent of adult Americans? credit reports, we find higher rates of insolvency and lower homeownership among inundated residents of New Orleans ten years after the storm, relative to their non-flooded neighbors. Residents of mostly-white and mostly-black neighborhoods obtain similar short- and long-term outcomes, though residents of white neighborhoods are more likely to migrate out of the city. Inundated New Orleans residents appear more likely to have migrated to neighboring states, but substantially less likely than nonflooded residents to have migrated north. However, we find that residents of the large Gulf Opportunity Zone surrounding New Orleans, who were also eligible for various federal programs, obtained net financial benefits in the years after Katrina; a decade later, those residents have higher rates of consumption and homeownership and lower rates of bankruptcy and foreclosure than residents outside the GO Zone. These net gains are found to be progressive?favoring young and low-income residents?and are broadly similar across black and white neighborhoods.