Estimating the effects of wind loss mitigation on home value

Abstract

AbstractWe empirically estimate the effects of windstorm loss mitigation features on the value of coastal homes using fixed‐effects and spatial regression hedonic models. We use housing data from the “Fortified Home” program, which prescribes and certifies windstorm resilience features for residential property. We test the extent to which Fortified construction and the location of a house relative to the coast act as mitigation complements or substitutes. We find that on average homebuyers located at median distance to the coast pay a 6%–7% premium for Fortified homes, which exceeds the typical cost of building or retrofitting houses to the Fortified standard. Fortified construction and distance of the house from the coast are mitigation substitutes. The premium is highest for homes nearest the coast. Our findings are robust under various specifications of spatial hedonic models.