Severe Flooding Disasters Significantly Increase Rents of Affordable Rental Housing Units

A paper published in Urban Affairs Review, “High and Dry: Rental Markets After Flooding Disasters,” reveals that severe flooding disasters result in significantly increased rents for the most affordable rental housing units in an affected area – with an estimated average increase of 5% in the year after a severe flood – while having no significant impact on the rents of units in the middle or at the top of the rent distribution. The article also finds that rental assistance distributed by the Federal Emergency Management Agency (FEMA) in areas affected by severe floods is not associated with these changes in rents. The findings indicate the importance of ensuring strong tenant protections and more equitable financial support for the lowest-income renters following disasters, especially as the frequency and severity of flooding events in the U.S. increase over time.

To examine the relationship between severe flooding disasters and rents, the researchers created a dataset of housing, demographic, and disaster variables from Integrated Public Use Microdata Series (IPUMS) USA data, which pulls from the Census Bureau’s American Community Survey. The dataset included 281 Public Use Microdata Areas (PUMAs) that had experienced at least one severe flood disaster between 2012 and 2018, covering roughly 301 million households over the seven-year period. PUMAs are geographic regions defined by the Census Bureau for sampling purposes and are useful for assessing fluctuations in rental housing markets because of their size: they are smaller than Metropolitan Statistical Areas, which roughly correspond to cities/towns and are therefore too large to see neighborhood-level changes, and larger than a Census Tracts, which may be too small to detect meaningful changes in housing costs within a one-year period. PUMAs with severe flood disasters were defined as those that received a Presidential Disaster Declaration for a flood event that resulted in an estimated value of property damage within the top 5% of all flooding disasters between 2002 and 2018.

The researchers then constructed a series of models to assess changes in rents following the first and second years after a severe flood disaster, specifically examining the lowest 10% and the mean of monthly gross rents paid by households in a given PUMA. The models also compared “mover households” – those that relocated following a severe flood disaster – to “non-mover households,” to account for differences in both the characteristics of households that are able or forced to move following a disaster and those that are able or forced to remain in place, as well as rent growth for new versus continuing tenants. To investigate the impact of FEMA rental assistance on rents, some of the models also analyzed the relationship between changes in rents post-flood and both the number of renters who received FEMA rental assistance and the total dollar amount of FEMA rental assistance administered for the disaster.

The models revealed that mover households from the lowest 10% of an area’s monthly gross rent distribution saw a 5% increase in rents (about $35) the year after a severe flood disaster and a 6% increase (an additional $5) in the second year post-disaster. The largest increases in rents for the lowest 10% of renters were found in areas with the most expensive rental markets, largest share of renters versus homeowners, and largest shares of residents of color pre-disaster. The authors also found that renters who move after a severe flood disaster tend to be “slightly wealthier and whiter” than renters who do not move, regardless of whether the households move into units priced at the lowest 10% or the mean of the rental market. They note that these findings align with prior research demonstrating that disasters (and floods in particular) in the U.S. disproportionately impact households of color, but they caution that the data used in this study does not include a large enough sample of renter households to run analyses by racial/ethnic group.

No significant interaction was found between the distribution of FEMA rental assistance and rents after a severe flood disaster, indicating that “FEMA aid is providing some assistance to renters without having a significant effect on market rents.” This result holds true whether it is based on the proportion of rental households affected by the disaster or the estimated severity of the disaster, suggesting that post-disaster changes in rents for affordable homes are influenced more by population change, the availability of affordable housing, and landlord behaviors than by the direct impact of the disaster on the housing stock. The researchers note that financial assistance for disaster recovery is vital to supporting the lowest income renters but emphasize that this assistance is not available to low-income renters whose homes were not damaged but who still face rising housing costs post-disaster. Furthermore, many renters who doqualify for FEMA rental assistance face substantial barriers to securing this assistance. The researchers strongly recommend that policymakers consider strengthening tenant protections to better safeguard renters post-disaster by, for example, limiting post-disaster rent increases and channeling funds for affordable housing construction to disaster-affected areas. They also call on the U.S. Department of Housing and Urban Development to more closely monitor the use of Community Development Block Grant-Disaster Recovery (CDBG-DR) funds to ensure that assistance is provided to low-income renters in need, not just homeowners.

Read the article at: