Three essays on discrimination and flood risk in housing markets

Box-Couillard, Sebastien

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https://hdl.handle.net/2142/129183 Copy

Description

Title

Three essays on discrimination and flood risk in housing markets

Author(s)

Box-Couillard, Sebastien

Issue Date

2025-04-07

Director of Research (if dissertation) or Advisor (if thesis)

Xu, Yilan

Doctoral Committee Chair(s)

Xu, Yilan

Committee Member(s)

• Christensen, Peter
• Hultgren, Andrew
• Timmins, Christopher

Department of Study

Agr & Consumer Economics

Discipline

Agricultural & Applied Econ

Degree Granting Institution

University of Illinois Urbana-Champaign

Degree Name

Ph.D.

Degree Level

Dissertation

Keyword(s)

• Housing
• discrimination
• flooding
• insurance

Abstract

This dissertation comprises three chapters aimed at understanding the dynamics of flood risk and discrimination in U.S. housing markets. Taken together, these papers explore how racial disparities in housing prices, flood risk, and recovery are interconnected. They highlight the dual challenges faced by racial minorities: both in terms of facing price discrimination and in risks posed by environmental factors like flooding. The findings underscore the need for policies that address these systemic inequities, particularly in disaster-prone areas, and emphasize the role of tools like flood insurance in mitigating recovery challenges in vulnerable communities. In “Does Flood Insurance Help Neighborhoods Recover from Flooding?” (Chapter 1), I investigate the impact of flood insurance on neighborhood recovery in the aftermath of Hurricane Harvey. Using a novel shift-share instrumental variable approach that leverages the flood experiences of unaffected peers, I analyze how flood insurance claims influence housing prices in Houston post-Harvey. This is the first study to causally identify the effect of flood insurance on post-disaster recovery at the neighborhood level. I find that neighborhoods with higher flood insurance claims experience significant increases in post-flood housing prices, indicating a positive role in recovery. An analysis of mechanisms reveals that flood insurance claims reduce foreclosure rates and promote home renovations, thereby stabilizing housing markets. Notably, I find that these positive effects are most pronounced in more disadvantaged neighborhoods, which see the greatest benefit from flood insurance. These findings suggest that flood insurance not only supports economic recovery but also enhances resilience in vulnerable communities, underscoring its value as a policy tool in disaster-prone areas. In “Racial Housing Price Differentials and Neighborhood Segregation” (Chapter 2), I provide the most comprehensive evidence to date on patterns of racial housing price discrimination in the United States and uncover mechanisms underlying these patterns. Using a panel of 40 million repeat-sales transactions, I find that price premiums faced by Black and Hispanic homebuyers are ubiquitous. Black and Hispanic buyers pay over 3% more than white buyers for the same home. These premiums are systematically higher in neighborhoods with a larger share of non-white residents and when non-white buyers purchase their home from sellers from outside their group. I test theoretical predictions about racial price differentials and find higher premiums in supply-constrained markets. Finally, leveraging exogenous variation in racial segregation caused by historical railroad placement, I find that racial segregation leads to larger price premiums paid by Black homebuyers. These findings imply that Black and Hispanic homebuyers continue to face significant hurdles in accessing quality housing, particularly where both homophily preferences and discriminatory constraints lead to constrained housing searches for minority buyers. In “Do Minorities Pay More to Avoid Flood Risk?” (Chapter 3), I show that differential housing prices for Black and Hispanic individuals are likely to play a role in differential sorting over flood risk. I assemble a dataset combining a panel of 26 million repeat-sales housing transactions, buyer race and flood zone changes between 2000-2020 across the United States. I identify price differentials by race and flood zone status using a repeat-sales model and plausibly exogenous changes in flood zone status at the property level. I find that, while persons of color pay over 3% more than white buyers for equivalent housing outside flood zones, these premiums are reduced to approximately 1% inside flood zones. Examining mechanisms, I find that where competition for “safe” housing is likely to be most fierce, premiums for Black and Hispanic buyers to live in “safe” areas are highest, reaching approximately 5%. I also find that an exogenous decrease in the supply of safe housing due to flood zone changes increases the price of the remaining safe housing in a housing market, and that this increase is larger for Black and Hispanic buyers. These patterns are likely to reflect important barriers to finding less risky housing for racialized minority buyers and be reinforced by the increasing frequency and severity of natural disasters.

Graduation Semester

2025-05

Type of Resource

Thesis

Handle URL

https://hdl.handle.net/2142/129183

Copyright and License Information

Copyright 2025 Sebastien Box-Couillard

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