In Preparation for submission

Do NFIP Subsidies Matter to Homebuyers? Evidence from Nationwide Housing Sales

with H. Allen Klaiber

In 2017, the National Flood Insurance Program exceeded its borrowing capacity. While half the debt was forgiven, more will be accrued due in large part to premium subsidies for older, vulnerable properties. Efforts to phase out subsidies are slow, at best, with many policymakers and constituents concerned over impacts of phase-outs on local communities.  Using an exogenous break in subsidy eligibility we estimate nationwide and metropolitan area specific difference-in-difference models to identify the capitalized value of existing subsidies in home values.  We find that NFIP subsidies do capitalize, albeit heterogeneously suggesting political challenges in implementing a phase-out are likely.  We further find that during a temporary removal of subsidies in 2012-2014, the capitalization of subsidies diminished, providing additional evidence of our causal mechanism.