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Valuing Seawall Protection in the Wake of Hurricane Ike

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Abstract

This paper estimates the value of seawall protection in the wake of Hurricane Ike using a difference-in-difference and fixed-effects type quasi-experimental approach. The analysis is based on residential housing transactions in Galveston, Texas from 2000 to 2014. The results suggest a positive price premium of up to 22% for seawall protected homes. The positive effect is found to be the highest after the occurrence of Hurricane Ike. Although as memory fades away the effect began decreasing gradually, the price premium of seawall protection still persists six years after Hurricane Ike.

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Notes

  1. A broader concept of natural capital also encompasses ecosystem services such as wetlands, mangroves, floodplains and other coastal habitat, which provide to coastal communities including coastal flood hazard mitigation.

  2. For example, flood control levees in the United States are primarily constructed and maintained by the US Army Corps of Engineers (USACE) from federal appropriations. Historically, beach creation and nourishment have been the main responsibility of the federal government (McNamara et al. 2015). After superstorm Sandy, the USACE authorized a staggering 4.5 billion dollars for dune creation and beach geoengineering projects in the North-East coastal region (Disaster Relief Appropriations Act of 2013, P.L. 113–2).

  3. In the disaster literature, adaptation and mitigation are used interchangeably and refer to coping and risk management strategies related to extreme events (Burton 1997; see FEMA definition: http://www.fema.gov/what-mitigation#1).

  4. Positive impacts of seawall as a historic landmark is unlikely to be seen in the place like Galveston that has a large number of housing with historic designation (not related to seawall).

  5. To the best of our knowledge, there is no literature that suggests from an engineering perspective regarding specific distance range within which a seawall can protect homes.

  6. Transitory effects of disasters have also been established in relation to purchase of flood hazard insurance (Gallagher 2014; Kousky 2017).

  7. Accuracy of the value estimates associated with environmental (dis)amenities are highly subject by the assumptions made about individuals’ perceptions of the quality of natural resources and knowledge about their benefits (Landry and Hindsley 2011).

  8. Seawalls are shown to exacerbate erosion in neighboring regions (Kraus 1988; Pilkey and Wright III 1988).

  9. According to the Bureau of Transportation Statistics https://www.rita.dot.gov/bts/sites/rita.dot.gov.bts/files/publications/national_transportation_statistics/html/table_01_57.html

  10. Source available at http://www.cnn.com/2017/04/27/us/weather-houston-hurricane-wall/index.html.

  11. In 2018 prices these correspond to $2628, $5840 and $16,643 correspondingly.

  12. CoreLogic, LLC is the largest property transaction record provider in the United States.

  13. H-GAC GIS dataset resources for the Houston-Galveston area are available to the public at http://www.h-gac.com/rds/gis-data/gis-datasets.aspx.

  14. GIS data resources for Galveston county are available to the public at http://www.galvestoncad.org/Appraisal/PublicAccess/.

  15. All the properties in V zones are not located behind the seawall but to the west of it and these homes are not considered as seawall-protected ones. The price of these homes are generally higher than other homes partially because of high amenity value in coastal zones. Because they are not comparable with treatment group, they are excluded from the sample for DD analysis.

  16. We use types of roofing material commonly used by insurance companies to discount premiums on homeowners insurance (e.g., https://www.statefarm.com/insurance/home-and-property/homeowners/discounts/roofing-materials).

  17. The data were obtained from the Harris County Flood Control District (HCFCD) available at https://www.hcfcd.org/.

  18. .

  19. The data sample is restricted to Galveston Island (i.e., City of Galveston) to ensure the appropriate selection of treatment and control groups.

  20. Ideally, one would use an engineering design if the structure to identify the treatment group by the seawall. To the best of our knowledge, there are no engineering guidelines on exact area the seawall can possibly protect, and in particular for a seawall that protects the island from one side, and water can rise and enter from the unprotected side.

  21. Discussions on different matching mechanisms can be found in Abbott and Klaiber (2013); Abadie and Imbens (2011) and Muehlenbachs et al. (2015).

  22. A traditional way to accommodate covariates like flood risk and foundation type is to enter the covariates linearly in the DD model (Abadie 2005). The results of the model that includes flood risk and foundation type variables in DD are presented in the Table C1 in Appendix C. The treatment effect is consistent with the results from the DD model as shown in Eq. (3).

  23. Because the dependent variable is in log terms, the marginal effect of the interaction term is calculated as (exp(β) − 1) (Campbell et al. 2011, p.2117).

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Authors and Affiliations

  1. Department of Marine Sciences, Texas A&M University, Galveston, TX, 77551, USA

    Meri Davlasheridze

  2. Department of Economics, Craig School of Business, California State University, 5245 N. Backer Ave, M/S PB20, Fresno, CA, 93740, USA

    Qin Fan

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  1. Meri Davlasheridze
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Correspondence to Meri Davlasheridze.

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This project was supported by the NSF PIRE- Coastal Flood Risk Reduction Program: Integrated, multi-scale approaches for understanding how to reduce vulnerability to damaging events. Award #1545837

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Davlasheridze, M., Fan, Q. Valuing Seawall Protection in the Wake of Hurricane Ike. EconDisCliCha 3, 257–279 (2019). https://doi.org/10.1007/s41885-019-00045-z

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