How income inequality influenced personal decisions on disaster preparedness: A multilevel analysis of homeowners insurance among Hurricane Maria victims in Puerto Rico

Abstract

Hurricane Maria ravaged Puerto Rico with massive winds and damaged more than 1/3 of its occupied homes. To achieve home recovery, Homeowners insurance (HI), provides an important financial resource for rebuilding and repairing. Yet, it is not known which factors determine the likelihood of homeowners adopting HI prior to such disasters. This study examines how individual income and community income inequality influenced personal decisions to adopt HI by homeowners suffering damage from Hurricane Maria. Using Individual Assistance Housing data collected by the Federal Emergency Management Agency (N = 265,807), we employed four nested multi-level logistic regressions to estimate household probabilities of having HI. First, our simplest random-intercept model found significant variation in HI adoption probabilities across 881 census tracts. Second, when adding individual household and housing characteristics, households with higher incomes were significantly more likely to adopt HI. Third, the addition of income inequalities in terms of Gini quartile ranges showed that relative to the lowest range, households in the three higher-range census tracts were less likely to adopt HI. Finally, the addition of a possible interaction between income and income inequality showed that income inequality significantly influenced the relationship between income and HI adoption behavior. Specifically, income inequality played different roles for poor and rich: impeding HI adoption behavior for low-income households while facilitating such a behavior for high-income households. Policy formulation should consider public-private partnerships to address HI affordability for those low-income households most vulnerable to housing damage.