Investigating the Effects of both Historical Wildfire Damage and Future Wildfire Risk on Housing Values

Abstract

A hedonic pricing model is applied to estimate the impact of two attributes of wildfire on housing values in the Wildland Urban interface (WUI): (i) a burn scar, representing the disamenity of a highly salient historical wildfire event; and (ii) the latent risk of a future wildfire. The investigation uses a GIS dataset, including the burn scar viewshed and a wildfire risk measure matched with geo-coded assessments of property values. This case study application is to the area surrounding the city of Los Alamos, New Mexico (NM), USA, where the Cerro Grande Fire of 2000 was a landmark wildfire disaster. Spatial econometric results indicate that the fire scar lowers the value of a typical house in our sample by 2.5 percent. In contrast, the mean risk of a future wildfire actually raises the value of a typical house by 0.4 percent. Rather than evidence of social learning, as the market would correct to better reflect fire hazards, results support the wildfire risk mitigation paradox, where private landowners continue to underinvest in risk mitigation.