Hurricanes hit the poor the hardest

Hurricane Harvey displaced more than 30,000 people, was responsible for at least 70 deaths, and is expected to cost between $70 and $108 billion. The economic damages from Hurricane Irma might be even higher. 

As hurricanes and other extreme weather events become more commonplace (and as coastal population density grows), so too do the costs associated with these events. Hurricane Katrina, after which 1.36 million people filed for FEMA assistance, was responsible for at least 1,800 deaths. But these costs are not evenly distributed. Low-income and minority communities are more vulnerable to the risks of natural disasters, and they also struggle most to recover.

To be sure, many high-income households have been ravaged by recent storms and will be affected by future natural disasters. But natural disasters are not “great equalizers.”

First, lower income Americans are more likely to live in neighborhoods or buildings more susceptible to storm shocks. Substandard infrastructure in affordable housing units and low-income communities place residents at greater risk to the effects of a severe storm. In the wake of Hurricane Harvey, low-income neighborhoods were more affected than wealthier ones, as poor families were more concentrated in flood-prone parts of Houston. Low-income and minority families are also more likely to live closer to noxious industrial facilities and are thus more at-risk to chemical spills and toxic leaks resulting from storm damage.

Second, poorer families are less well insulated against the economic shock that often accompanies the physical one. In the eight counties most severely-affected by Hurricane Harvey, only 17 percent of homeowners held flood insurance policies, which are more commonly held by wealthier households. Even with FEMA assistance, poor households affected by storm damage will likely confront the consequences for years to come. Ten years after Hurricane Katrina, residents whose homes flooded during the storm had lower credit scores and rates of home ownership than their neighbors who were spared the worst.

Third, more affluent people can more easily relocate to safer areas, as a recent NBER working paper by Leah Platt Boustan, Matthew E. Kahn, Paul W. Rhode and Maria Lucia Yanguas shows. Drawing on a 90-year data set including all the natural disasters in the United States, from mild to the most severe storms, the researchers estimated how these shocks impact local poverty rates and outmigration at the county level. A one standard deviation increase in the disaster count (equivalent to 2.4 disasters) increased outmigration by one percentage point (about 600 residents in a typical county), with stronger reactions in response to hurricanes.

For very large disasters (responsible for at least 100 deaths), county-level poverty rates increased by over one percentage point. Housing prices also decline following severe disasters. The findings indicate that the non-poor are moving out, the poor are migrating in, and/or that the existing population transitions into poverty following a severe weather event. In any of these scenarios, the implications are clear: severe weather shocks exacerbate inequality.

Recent Census Bureau statistics indicate that median household income increased and poverty rates decreased in 2016. The national statistics are encouraging, but they mask plenty of variation at the local level. Recent hurricanes are unlikely to change the national story, but they certainly influence the immediate well being and long-term fortunes of local residents and communities affected by the damages. “During a time of increased concern about income inequality and climate change risk, natural disaster exposure risk could become another cause of rising quality of life inequality between the rich and the poor,” conclude the NBER research team.

As the frequency and severity of hurricanes and other severe weather events increase, so too will their impact on the poor.