Journal article
Managing Unpriced Climate Risks in US Housing Markets
Review of environmental economics and policy
07/01/2026
DOI: 10.1086/741732
Abstract
Climate risks are not fully priced in US housing markets. This mispricing can distort household decision-making and may create perverse incentives for development in high-risk areas. Unpriced climate risk could also cause sudden adjustments in home values when consumers’ perceptions of climate risks change, creating market instability. To improve the economic efficiency of housing markets, state and federal policies are needed to correct the market failures underlying this mispricing. However, depending on how they are implemented, certain policy interventions could introduce destabilizing effects and may worsen socioeconomic inequality. To support policy makers navigating these trade-offs, we review how policies that contribute toward more efficient pricing of climate risk can either support or hinder market stability and progressive distributional outcomes. We specifically focus on how three sets of state and federal policy levers—improving climate risk information, removing subsidies for development in high-risk areas, and increasing public investment in disaster risk reduction—can be implemented to reprice climate risk in housing markets following a gradual and transparent pathway, while protecting low-income households from adverse financial impacts.
Details
- Title: Subtitle
- Managing Unpriced Climate Risks in US Housing Markets
- Creators
- Jesse D. Gourevitch - Environmental Defense FundKarina French - Environmental Defense FundCarolyn Kousky - Environmental Defense FundYanjun (Penny) Liao - Resources For The FutureAdam Pollack - Dartmouth CollegeJoakim A. Weill - Federal Reserve Board of Governors
- Resource Type
- Journal article
- Publication Details
- Review of environmental economics and policy
- DOI
- 10.1086/741732
- ISSN
- 1750-6816
- eISSN
- 1750-6824
- Publisher
- University of Chicago Press
- Grant note
- High Meadows Foundation National Science Foundation (NSF) as part of the Megalopolitan Coastal Transformation Hub (MACH) under NSF award: ICER-2103754
We thank Kate Boicourt, Lala Ma, and Frances Moore for providing thoughtful comments and feedback on earlier versions of the article. J.G. was supported by the High Meadows Foundation. J.G., C.K., K.F., and A.P. were supported by the National Science Foundation (NSF) as part of the Megalopolitan Coastal Transformation Hub (MACH) under NSF award ICER-2103754. This is MACH contribution number 73. The views expressed in this article are solely the responsibility of the authors and should not be interpreted as reflecting the opinions of the NSF, MACH, the Federal Reserve Board of Governors, or of any other person associated with the Federal Reserve System.
- Language
- English
- Electronic publication date
- 07/01/2026
- Academic Unit
- School of Earth, Environment, and Sustainability
- Record Identifier
- 9985180878502771
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