Fewer Federal Incentives May Help At-Risk Communities Adapt to Climate Change
💡 What’s the story?
The number of people and properties in areas at risk of floods and fires has grown over the past several decades. As decisionmakers grapple with how to limit the economic toll of climate change, what policies may be particularly effective at curbing growth in the most vulnerable places?
According to new research, one answer may be to discourage federal incentives for development in areas at high risk of flooding. The study, published today in the journal Nature Climate Change, explores the long-term economic impacts of the Coastal Barrier Resources System, a policy enacted in the 1980s that made certain high-risk areas ineligible for federal flood insurance policies, public infrastructure investments, and post-disaster aid. The study shows that the policy worked: over the past 40 years, the density of development inside designated areas fell substantially, whereas density in neighboring areas increased.
The findings suggest that the Coastal Barrier Resources System created significant savings for the federal government by reducing flood claims submitted to the National Flood Insurance Program while increasing the property tax base in coastal counties
Author Perspective
“The Coastal Barrier Resources System did not prohibit development in vulnerable areas—it just removed systems that supported growth in places that may not have succeeded without government intervention. The idea of adapting to climate change through less federal intervention, rather than more, could be a compelling and cost-effective way of reducing exposure to risk.”
—Margaret Walls, Senior Fellow and Director of RFF’s Climate Risks and Resilience Program
🌊 How do we know?
The research team analyzed the effects of the Coastal Barrier Resources System by comparing areas chosen for the program in 1982 with “control” areas that were left to their own devices. These control areas had similar land cover, infrastructure density, flood risk, and development patterns in the years leading up to the policy as areas chosen for the program.
By comparing the two sets, this new study provides a comprehensive assessment of the policy’s impact on flood damage, property markets and development, sociodemographic outcomes, and local government finances. Notably, the authors examine not only the designated areas, but also neighboring lands, to form a full picture of the program’s impacts.
🏘️ How are communities affected?
The research team found that the Coastal Barrier Resources System sometimes led to significant changes for local communities. Designated areas had 83 percent fewer buildings per acre than control areas. Chosen areas also saw a 41 percent reduction in built-up surface area, which includes infrastructure such as parking lots and roads, compared to unchosen areas.
The policy also generated cobenefits for nearby communities. The conservation of natural lands resulting from lower development levels increased property values and reduced flood damages in areas adjacent to designated lands. This implies that the policy not only reduces exposure to climate risks, but also enhances the amenity value and resilience of coastal communities.
Because of higher costs for landowners, limited housing supply, and an increase in nature-based amenities due to the program, chosen areas and surrounding communities tended to attract more affluent residents and became less affordable to renters. In the chosen areas, designation increased median household income by $15,000, or 19 percent, relative to control areas. The rent-to-income ratio increased by 6 percent. The percentage of Black residents in designated areas fell by 29 percent.
📜 How do states play a role?
While designation did prevent development in most cases—in line with the program’s goal—the range of impacts is quite large. The policy is most effective in Delaware, Georgia, Louisiana, New York, Rhode Island, and South Carolina; in these states, built-up areas decreased by over 50 percent due to the policy.
However, federal incentives are only one piece of the puzzle that encourages growth in vulnerable areas. State and local governments, which are primarily responsible for land use, zoning, and development-incentive decisions, play a major part in climate adaptation policy.
The team found that development in designated areas increased in some states relative to the control group. Notably, the team did not find a strong relationship between development on designated tracts and a state or locality’s “environmental friendliness.” The researchers hypothesized that the increase could be explained by state and local governments offering increased subsidies to compensate for the withdrawal of federal incentives—a sign that all levels of government need to collaborate for effective climate adaptation policy.
📚 Where can I learn more?
For more information, read the article “Removing Development Incentives in Risky Areas Promotes Climate Adaptation” in the journal Nature Climate Change. The paper was authored by Hannah Druckenmiller (RFF and the California Institute of Technology), Yanjun (Penny) Liao (RFF), Sophie Pesek (RFF and UC Berkeley), Margaret Walls (RFF), and Shan Zhang (Old Dominion University).
For author commentary on the findings, read the related policy brief in Nature Climate Change.
Resources for the Future (RFF) is an independent, nonprofit research institution in Washington, DC. Its mission is to improve environmental, energy, and natural resource decisions through impartial economic research and policy engagement. RFF is committed to being the most widely trusted source of research insights and policy solutions leading to a healthy environment and a thriving economy.
Unless otherwise stated, the views expressed here are those of the individual authors and may differ from those of other RFF experts, its officers, or its directors. RFF does not take positions on specific legislative proposals.
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