Racial Gaps in Federal Flood Buyout Compensations

Abstract

In a managed retreat, or “buyout,” program, homeowners are offered their property's fair-market value to relocate from a flood-prone area. Using a nationwide sample of federal buyout acquisitions and the universe of US housing transactions over the last two decades, we estimate whether the discount in buyout price compensation, calculated using a hedonic prediction model, depends on a homeowner's race. We provide the first systematic evidence of inequitable compensation in a federal buyout program using nationwide administrative data. Disproportionate compensation, in an attempt to adapt to a warming climate, may further widen the wealth and social mobility gaps.