Political Affiliation and the Pricing of Climate Risk in Mortgages

Abstract

Using voter registration data of loan officers originating residential mortgages in coastal areas, I analyze whether climate change partisanship is reflected in mortgage lending. I find that Democratic loan officers charge higher loan spreads for mortgages on properties exposed to sea level rise (SLR) than Republican loan officers. The results hold after controlling for loan officer fixed factors. Partisan sorting is more pronounced for properties outside FEMA-designated flood zones, and for loan officers located nearer the coast or in communities with fewer climate change believers. These findings highlight how political ideology shapes the pricing of climate risks in mortgages.

Keywords

Tags of Social Finance