Moving to Risk: The Effect of Climate Risk Information on Residential Mobility and Spatial Inequality

• In Event: Housing policy levers for equitable climate adaptation

Abstract

Though housing markets and urban development have largely ignored climate risk for the last century, this approach is decreasingly viable. As the climate crisis becomes more salient, property values are increasingly responsive to climate risk. This change threatens our broader economic structure predicated on homeownership as a stable mechanism of wealth-building.  

One of the biggest recent policy changes has been the increase in availability of climate risk information throughout the housing market. Both consumers and policymakers have pushed for greater transparency about climate risks in the housing market, which will ideally be used to help households make informed decisions about where to live and more fully “price in” climate risk as a neighborhood disamenity. 

Consequently, in the last decade, policy and technological changes have dramatically increased the availability of climate risk information available to home seekers. Between 2018 and 2024, ten states enacted or improved their flood disclosure laws, five of them in 2024 alone. In the insurance domain, FEMA completed the implementation of "Risk Rating 2.0" in 2023, which significantly rolls back subsidies for flood insurance and aligns insurance rates with individual properties flood risk. Separately, housing search platforms such as Costar, Redfin, and Zillow have begun to present information on a property or neighborhood's climate risks. Formative research has shown that these changes are consequential for home values and households’ residential decision-making processes.  

In this paper, I study the effects of climate risk information on residential mobility patterns. I focus specifically on the effects of a 2019 Texas law that reformed real estate disclosure requirements, newly requiring sellers to disclose information about a property and neighborhood's flood risk to buyers. Using a differences-in-differences model with ten years of data from the Home Mortgage Disclosure Act (HMDA) capturing all mortgage applications, I find that the policy change led to a 9% decrease in mortgage applications in the moderate risk flood zone, providing some evidence that the additional information enabled households to make informed decisions and avoid exposure to risk. These findings are not robust in all specifications. 

However, I also find evidence of unintended policy consequences: in low-income counties, mortgage applications in the high risk flood zone increased 16%, with the largest effect sizes for low-income, Black, and Latino households. These findings are robust and larger in magnitude than the observed decrease for moderate risk flood zones. I hypothesize this pattern is driven by falling property values, which lower barriers to entry for low-income, Black, and Latino households to buy homes, but in the most environmentally risky neighborhoods. Therefore, these housing market shifts produced by increased climate risk information constitute a double-edged sword: they democratize access to climate risk information, but also may function as an environmental form of "predatory inclusion." These findings reveal one way in which market-based approaches to climate housing policy may redirect neighborhood migration flows in ways that exacerbate existing patterns of spatial, racial, and environmental inequality.

Author

• Katherine Anne Thomas, New York University
  Presenting Author