Instituto de Economía

Abstract: Homes exposed to sea level rise (SLR) sell at a 7% discount relative to observably equivalent unexposed properties equidistant from the beach. This discount has grown over time and is driven by sophisticated buyers and communities worried about global warming. Consistent with causal identification of long horizon SLR costs, (1) we find no relation between SLR exposure and rental rates, (2) current SLR discounts are not caused by differential investment, flooded properties, or views. Overall, we provide the first evidence on the price of SLR risk and its determinants. These findings contribute to the literature on how investors price long-run risky cash flows and have implications for optimal climate change policy.