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Optimal real estate capital durability and localized climate change disaster risk

Devin Bunten () and Matthew Kahn ()

Journal of Housing Economics, 2017, vol. 36, issue C, 1-7

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.

Keywords: Capital durability; Climate change; Risk (search for similar items in EconPapers)
JEL-codes: Q54 R39 (search for similar items in EconPapers)
Date: 2017
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