Rising Fears and Tides: Flood Risk Perceptions in New Jersey Before & After Hurricane Sandy

Abstract

Do natural disasters have long term impacts on the spatial economy? This thesis aims to determine the impacts of Hurricane Sandy on perceptions of flood risk and spatial sorting of income groups, population density, and racial composition. Using a pooled cross-sectional analysis with interaction expansions and hedonic controls, this study builds off the Rosen-Roback spatial equilibrium model to assess changing valuations of areas with high flood risk and Hurricane Sandy exposure by examining both properties and census tracts. Though flood zone properties are more expensive, the results show a dip and partial recovery of property prices, which reflects both an element of physical damage from the storm, as well as changing amenity values associated with flood risk. The difference in prices of flood zone properties and non-flood zone properties falls 26% in the years following Hurricane Sandy. This relative price drop was even greater for properties in counties exposed to high winds (over seventy-five miles per hour) during Hurricane Sandy. The census-tract-level analysis also shows that poorer communities are more exposed to flood risk, though this does not change at conventionally significant levels after Hurricane Sandy.