While wildfire victims tend to be wealthier than those of other natural disasters, damage in fire zones disproportionately lands on low-income households, according to a working paper released Tuesday by a UC San Diego researcher and his colleagues.
The National Bureau of Economic Research paper found the long-term economic consequences resulting from wildfires can extend far beyond losing property, including loss of income and years of rebuilding.
"While wildfire victims on average are relatively affluent, we find that losing a home leads to years of financial disruptions that go beyond the immediate costs of rebuilding the burned property," said paper co-author Judson Boomhower, associate professor in the Department of Economics at the UCSD School of Social Sciences. "Earnings fall for years after the fire and people do not simply bounce back even after rebuilding."
The study combines home address-level damage data from about 100,000 individuals and 50,000 homes inside of more than 100 wildfire areas. The researchers found households that lose their homes in a wildfire see their earnings fall for three years after the event, with losses peaking at about 10% in the first year. Over that period, the average wildfire victim loses the equivalent of 26% of their pre-fire annual income, or about $35,000.
Additionally, burned homes take years to be reoccupied. According to the research, half of burned homes remain empty four years after a fire. Those that do reoccupy a property tend to be younger and wealthier than those who lived there before, what the authors of the paper call "post-disaster gentrification."
The authors admit adequate insurance coverage was not a factor of the study, but the data does offer a look at the economic consequences of wildfire loss by linking property damage data with income tax and Census records.
Boomhower said the findings show wildfire is not only a climate and public safety issue, but also a challenge for markets and policy.
"We're facing a much warmer world and the big question now is how markets, innovators and policymakers can help society adapt," he said.
The paper concludes that the economic burden of wildfire extends beyond the fire line itself, leaving policymakers, insurers and households facing pressure to adapt to a warmer and more fire-prone world.
