Real estate wealth inequality and exposure to natural disasters
Abstract
This paper examines how natural disaster risks are distributed across tenants, owner-occupants, and owners of rental, second, and vacant homes. Using dwelling-level data covering the entire French housing stock, I document large disparities in exposure to flooding and subsidence. Prior studies, relying on aggregate income data and focusing only on residents, typically find that low-income households are more exposed to flooding. However, this approach overlooks half of the exposed housing stock, owned by non-residents. Once these properties are included, flood risk appears concentrated among wealthy second-home owners, while subsidence mainly affects single-property homeowners. These ownership patterns have important policy implications. First, untargeted flood insurance subsidies tend to benefit second-home owners, whereas subsidence coverage mainly supports owner-occupants. Second, using a new approach to estimate risk discounts, I show that natural disaster risks are not priced into properties owned by absentee landlords, driving 13% to 25% of the total overvaluation in flood-prone areas. Finally, place-based adaptation policies such as building resilient defenses may fail to target the most critical areas if ownership structures are ignored.
