Racial Dynamics of Federal Property Buyouts in Flood-Prone Areas

The use of managed retreats, or “buyouts,” of flood-prone properties is likely to grow as an adaptation response to increasing flood risks. This paper investigates the role of race and ethnicity in buyout bargaining outcomes and how those outcomes affect longer-run neighborhood change. We combine nationwide administrative data on federal property acquisitions, housing sales transactions, and restricted-use Census microdata to estimate whether there are systematic differences by race in buyout payments relative to a property’s fair market value. We then use a database tracking individual movement over time to examine the quality of the neighborhoods to which participants move and how neighborhood outcomes vary by race and program participation. We find that the buyout compensation received by households of color is at least 6 percent lower than that received by white households. White participants relocate to higher quality neighborhoods and are better off than white nonparticipants. Black participants, on the other hand, move to worse neighborhoods and are worse off than Black non-participants. Our work highlights how government policy, aimed to address increasing climate impacts, may exacerbate the burden of climate change on vulnerable communities.