NEHRP Clearinghouse

Title
Impact of Disasters on Construction Costs.
File
PB294020.pdf
Author(s)
Cochrane, H. C.; Revier, C. F.; Nakagawa, T.
Source
National Science Foundation, Washington, DC. Applied Science and Research Applications., January 1978, 120 p.
Abstract
The study determines the potential for building costs to escalate following a major disaster. Real estate market data was collected from 14 communities which sustained significant damage from either flooding, tornadoes, fire, earthquake, or cyclone. Analysis of the data provided a time path of housing prices from the pre- to the post-disaster period. A dynamic three-equation model of the housing market was tested with price paths developed for Xenia (tornado), Rapid City (flood), and New Orleans (flood). Because the model is able to separate the influence of supply from demand, it provides a more accurate reading of price effects and more sensitive tool with which to assess public policy. Analysis of the resultant time paths suggests that land-use management and improved building techniques are more beneficial than previously thought. They also suggest that Federal aid, under certain circumstances, may simply push prices upward, inflicting additional hardship on those who can least afford it. Lastly, the model indicates that post disaster wage and price controls will prove to be an undesirable method for dealing with the problem. Price stability will be purchased at the expense of an elongated reconstruction period.
Keywords
; Economic impact; Floods; Cyclones; Economic models; Earthquakes; Construction costs; Real property; Residential buildings; Housing studies; Demand (Economics); Supply (Economics); Prices; Tornadoes; Assessments; Land use; Fires; Disasters; Inflation