High and Dry
Rental Markets after Flooding Disasters
Mark Brennan (MIT; Rutgers University-Camden), Tanaya Srini (MIT), Justin Steil (MIT)
Recent hurricanes, floods, and wildfires across the United States highlight the devastating effect of climate change on individuals and households. Renters and households with low incomes are disproportionately exposed to and harmed by these disasters in many ways – but there are still open questions about the effects of these disasters, specifically on rents.
On the one hand, disasters often lead people to leave affected areas, which may lessen demand for housing and lead to lower rents. On the other hand, disasters generally damage housing units, rendering some unusable, which may lower supply and lead to higher rents.
One challenge in analyzing the relationship between disasters and rents is that rents are “sticky”: most people re-lease their same home at the end of their rental contract, and their rent commonly changes less for lease renewals than for new leases This means that aggregate data on rents would largely not undergo sharp changes in new rents due to a shock like a severe flood because it mostly reflects sticky existing rents that do not change much year to year. We overcome this difficulty by using household-level records that first identify households that moved and those that did not and then isolate the dynamics of the post-disaster market by comparing rents for households that moved in the past year to households that did not move that year.
Our research finds that severe floods are associated with significant increases in rents for rental units priced at the bottom of the rent distribution but not the middle or the top. This spike translates to an estimated average 5% increase in rent for households renting at the bottom of the distribution – a substantial burden for low-income households, especially after a disaster
Given the finding that disasters increase rents at the bottom of the distribution, some might ask whether federal aid could contribute to that increase. There is the possibility that that the influx in federal rental assistance (a demand-side subsidy) could drive up rents, or that landlords could exploit that aid to charge above-market rents. Our research finds that disaster rental assistance is not associated with changes in rents after flooding disasters.
These findings suggest that there may be a need for increased support for low-income renters after disasters, including those who are not directly displaced by the disaster. While current federal rental assistance may aid qualifying disaster-displaced households without that assistance raising costs for others, it does not reach low-income renters whose homes are not damaged and who are thus ineligible for assistance yet still face increased housing costs as a result of the disaster.
Mark Brennan is an incoming Assistant Professor at Rutgers University in Camden. He improves operations and figures out how they impact wellbeing. Mark recently ran supply chains for the United Nations food relief agency and analytics for a large public ambulance system in the US.
Tanaya Srini is a graduate of MIT's Department of Urban Studies and Planning. She has previously researched housing and inequality at The Urban Institute and the National Housing Law Project and currently serves as Senior Advisor in the Policy Development & Research Division of the U.S. Department of Housing and Urban Development.
Justin Steil is an Associate Professor of Law and Urban Planning at MIT. He analyzes how power is exercised through control over space. Recent scholarship has focused on environmental justice, housing discrimination, and land use. He is the co-editor of Furthering Fair Housing: Prospects for Racial Justice in America's Neighborhoods; The Dream Revisited: Contemporary Debates about Housing, Segregation, and Opportunity; and Searching for the Just City: Debates in Urban Theory and Practice.