Disaster-Induced Displacement: Effects on Destination Housing Prices

Abstract

Hurricane Katrina displaced more United States residents than any disaster since the Dust Bowl. Approximately 1 in 5 New Orleans residents relocated to Texas, moving from a majority Black city to places in which no group predominates. The arrival of Katrina survivors led to documented changes in local schools and labor markets; the Katrina diaspora’s effect on housing markets, however, remains understudied. What effect should we expect? In-migration constitutes an increase in demand, pushing prices up—but existing residents may have a preference for segregation, leading them to decrease their own demand for affected neighborhoods. In this paper, we assess the effect of large flows of Katrina survivors from New Orleans on housing prices in Texas neighborhoods. Recognizing that associations could reflect selection on the part of survivors, who might be attracted to neighborhoods with declining prices, we construct an instrument for survivor in-flows using the destinations of pre-Katrina movers. We find that neighborhoods with larger inflows of survivors see slower house price growth, even after controlling for neighborhood characteristics and differences between cities. The house price effect is persistent: five years after Hurricane Katrina, we estimate that the neighborhoods receiving the largest in-flows of displaced people saw approximately 7.5% lower housing price growth in comparison with similar neighborhoods where no survivors relocated. Finally, we show that effects are concentrated in places that received economically disadvantaged movers or movers from predominantly Black neighborhoods of New Orleans. Altogether, these findings are consistent with the hypothesis that existing residents have a demand for segregation vis-a-vis Katrina survivors. As climate change makes large disaster-induced population flows increasingly common, there is a critical need for further research on how to ameliorate the costs of these large relocations, both for the individuals who must relocate and for the places in which they resettle.