Rebuilding from 2017's Natural Disasters: When, For What, and How Much?

by Kermit Baker and
Alexander Hermann

The bulk of repairs to homes damaged by this year's record-setting disasters will not be done until 2019 or 2020, according to our analysis of post-disaster spending between 1994 and 2015. The analysis, which looked at the estimated annual cost of natural disasters alongside annual estimates of disaster-related home repairs and improvements, suggests that an increase of $10 billion in total disaster losses any time in the previous three years is associated with about $300 million in additional annual spending on disaster-related home repairs and improvements.

Notes: Dollar values are adjusted for inflation using the CPI-U for all items. Natural disaster costs include only natural disasters that generate over $1 billion in damages after adjusting for inflation.
Sources: JCHS tabulation of US Housing and Urban Development, American Housing Survey, and National Oceanic and Atmospheric Administration data.

The finding is significant because 2017 was an unusually destructive year. While inflation-adjusted, disaster-related damages averaged about $40 billion a year between 1994 and 2015, Hurricanes Harvey, Irma, and Maria together caused about $150 billion in damages, according to estimates from CoreLogic and Moody’s Analytics (Figure 1). Moreover, damages from 2017’s winter storms, droughts, and wildfires will push these numbers even higher. In fact, the total cost of 2017’s disasters could exceed damages from any year in the last two decades, including 2005, the previous record year, when Hurricanes Katrina and Rita (and a host of smaller but significant disasters) combined to cause more than $200 billion in damages (in inflation-adjusted dollars).

As in other years that were marked by particularly destructive storms and other disasters, this year’s damages should lead to a spurt in construction activity. Some of it will be construction of and renovations to infrastructure and commercial buildings. Some will be the construction of new single-family homes and multifamily housing units. And some will be disaster-related repairs and improvements to both owner-occupied and rental housing.

Extensive flooding from Hurricane Harvey in Port Arthur, Texas.

To estimate how much will be spent on post-disaster home repairs, and when that spending is likely to occur, we combined information on disaster-related damages reported by the National Oceanic and Atmospheric Administration (NOAA) with data on disaster-related home repairs and improvements for the same years found in the U.S. Census Bureau’s American Housing Survey (AHS). The AHS, as a survey of households, only asks owners to report spending on their homes. The comparison suggests that renovation spending continues to increase for about two to three years after the natural disaster occurs, and that an increase of $10 billion in disaster losses any time over the prior three years generates about $300 million in additional disaster-related home improvement spending during the year studied. If this pattern holds, the bulk of the spending from 2017 losses won’t occur until 2019 or 2020. But when it occurs, there is likely to be a substantial increase in spending on home renovations in those years.

While the delay between disaster losses and repair expenditures may seem unusually lengthy, it is consistent with a study funded by the U.S. Department of Housing and Urban Development (HUD) that examined the rebuilding that took place following Hurricanes Katrina and Rita. In a recent Joint Center blog on that study’s implications, our colleague Jonathan Spader (who worked on the initial HUD study) reported that only 70 percent of hurricane-damaged properties in Louisiana and Mississippi had been rebuilt by early 2010, five years after the storms. The study further found that 74 percent of owner-occupied homes had been rebuilt, compared to only 60 percent of the rental properties.

The delays are due to many factors. Insurance companies need to assess the extent of the damage and determine how much is covered. Home improvement contractors, stretched to the limit and suffering from a labor squeeze, must delay certain projects. Owners have to consider local housing and labor market conditions to determine if repairs or improvements make financial sense. Often, federal, state, and local government entities may slow down rebuilding while they decide whether it’s feasible and, if so, whether building codes and insurance guidelines should be more stringent.

Nevertheless, spending will occur and, when it does, it can be substantial. Illustratively, in 2015 (which came after a few relatively mild years for disasters) spending on disaster-related home renovations accounted for almost $11 billion of the $220 billion spent nationally improving owner-occupied homes according to the 2015 AHS. (Lightning and fires accounted for $2.4 billion of this spending, floods for $2.0 billion, and tornados and hurricanes for $1.6 billion. Winter storms, thunderstorms, earthquakes, and drought accounted for the remainder.)

In short, 2017’s hurricanes and other disasters are likely to result in substantial spending on rebuilding, repairs, and improvements to disaster-damaged homes. Moreover, while that spending will ramp up slowly, it is likely to stretch into next decade.

Rationales for (and Challenges to) Addressing Residential Segregation

by David Luberoff, Deputy Director

The consequences of racial segregation, the rationales for public policies to address those consequences, and the priorities for action are the central focus of three papers we released today as part of a new series of papers and blogs on A Shared Future: Fostering Communities of Inclusion in an Era of Inequality.

The newly released papers are:

Sheryll Cashin
Georgetown University

Integration as a Means of Restoring Democracy and Opportunity, by Sheryll Cashin, examines the role physical segregation plays in undermining race relations, democracy, and opportunity in the United States. The paper argues that segregation and supremacy must be dismantled with the same level of concerted effort and intention with which they were cultivated. While Cashin notes that the enduring effectiveness of divide-and-conquer, dog-whistling politics makes it unlikely that this work will be carried out by class-based coalition of people of all colors, she is optimistic about the possibilities for creating ascending coalitions of culturally dexterous whites and progressive people of color that could fight together for integration and equity in the regions where they live.

Nancy McArdle &
Dolores Acevdo-Garcia,
Brandeis University

Consequences of Segregation for Children's Opportunity and Wellbeing, by Nancy McArdle and Dolores Acevedo-Garcia, notes that mounting research evidence increasingly reveals the cost of segregation in terms of children's health, education, and long-term economic success. The paper argues for concentrated efforts to promote integrated, diverse education, which has been shown to improve critical thinking and problem-solving skills, the development of cross-racial trust, and the ability to navigate cultural differences. Given the close connection between residential patterns and school assignments, the policies that encourage neighborhood integration, including affirmatively furthering fair housing, enforcing anti-discrimination laws, providing incentives for affordable housing construction in higher opportunity areas, and inclusionary zoning, would likely also reduce segregation in schools, as well as provide more equitable access to other neighborhood assets that are beneficial to child wellbeing. However, they warn that since new policy directions regarding taxes and entitlements, fair housing, and school choice, to name a few, all have great potential to exacerbate economic and racial/ethnic segregation, the present is an especially significant moment to understand the extent and costs of segregation for children.

       Jennifer Hochschild
    & Shanna Weitz
    Harvard University

Challenging Group-Based Segregation and Isolation: Whether and Why, by Jennifer Hochschild and Shanna Weitz, explores two fundamental contradictions in liberal norms that make it challenging to effectively intervene to reduce the disadvantages of isolated or segregated communities. The first challenge involves the tension between the desire to end segregation and isolation and the fact that, in some situations, liberal ideals permit, and in some circumstances encourage, group isolation and separation. The second is that, while there are well-established ways to address racial and ethnic isolation, the US lacks a parallel set of norms, laws, practices, and advocates for lessening class isolation. The authors conclude by noting that liberal polities have never sorted out the tension between individual rights and group autonomy and probably never will. However, they add, that is no excuse for failing to take the steps toward freedom of choice and exciting opportunities to flourish that any liberal should embrace.

In combination with a previously released framing paper, which summarized existing evidence on patterns, causes, and consequences of residential segregation in the United States, the three papers help set the stage for other papers from the project. Those papers, which will be released monthly over the next half year, will focus on the question of "what would it take" to create and carry out policies to address a range of housing-related issues including integration, gentrification, and education. The papers, which will also be collected into an edited volume to be published in 2018, initially were presented at a two-day symposium that was convened by the Joint Center in April 2017.

A Shared Future: Fostering Communities of Inclusion in an Era of Inequality

by Jonathan Spader and
Shannon Rieger

Almost 50 years after the passage of the Fair Housing Act, what would it take to meaningfully reduce residential segregation and/or mitigate its negative consequences in the United States?

Over the next several months, the Joint Center for Housing Studies will publish working papers on various aspects of this question written by a diverse set of scholars, policymakers, and practitioners. The papers will be available on our website and will also be collected into an edited volume to be published next year. The papers were presented at a two-day symposium, A Shared Future: Fostering Communities of Inclusion in an Era of Inequality, that was convened by the Joint Center earlier this year.

At the symposium's seven thematically-focused panels, the authors took stock of the changing patterns of residential segregation by race/ethnicity and income, and examined concrete steps that could achieve meaningful improvements within the next 10-to-15 years. On a monthly basis from this fall until next summer, we will publish those papers on a panel-by-panel basis, along with a series of blogs, many of them by others who attended the symposium, that further engage with the event's central question.

This process begins today with the publication of our framing paper for the symposium, which summarizes existing evidence on three topics: the current patterns of residential segregation by race/ethnicity and income, the causes of residential segregation in the United States, and the consequences for individuals and society. The paper also examines the rationale for government action in these areas as well as the key levers that policymakers could use to change the current situation. Because each of these topics is the subject of a larger and longstanding research literature, our summary is not exhaustive. Rather, we seek to provide a concise overview of existing research, so that the papers which follow can focus on potential solutions.

Our discussion of these topics is a reminder of both what has been accomplished since the passage of the Fair Housing Act (technically Title VII of the Civil Rights Act of 1968) half a century ago and also how far the US remains from the aspirations put forth when it became law. In particular, we note that while the extent and nature of discrimination have changed int he last five decades, the legacies of historical segregation and exclusion by government, private institutions, and individuals have continued to produce stark and stubborn patterns of racial segregation in US metropolitan areas.

At the same time, we note that changes in demography, income distribution, and the geography of American communities are changing the patterns of residential segregation by income and race/ethnicity. The bursting of the housing bubble and the Great Recession exacerbated distress among poor communities—particularly poor communities of color. In many metropolitan regions, job growth in central cities, improved neighborhood amenities, and increased demand for urban living have also fostered rapid increases in housing costs in longstanding low-income and minority communities located in or near those regions' urban cores. While gentrification has been one of the most visible signs of these changes, the suburbanization of lower-income households and the growing self-segregation of high-income households into wealthy enclaves are equally consequential.

The framing paper also documents the severe costs of this separation for all members of society, as well as the disproportionate burdens imposed on residents of neighborhoods with concentrated disadvantage. Residents of such neighborhoods—who are most often members of minority racial and ethnic groups—face elevated risks to their health, safety, and economic mobility. Moreover, at a national scale, there is compelling evidence that these individual costs constrain the economy from reaching its full potential while also increasing levels of prejudice and mistrust within the populace and impairing the functioning of our democracy. These costs, along with the potential benefits of greater integration, highlight the need for continued attention and innovation to these challenges.

The symposium papers, which will be released over the next few months, will present multiple perspectives about how we might address these challenges. Our hope is that they will raise questions, spur discussions, and ultimately contribute to forward progress.