Razing San Francisco: the 1906 Disaster As a Natural Experiment in Understanding Urban Land Use
Abstract: Natural disasters that destroy urban areas leave opportunities to adapt city environments to contemporary needs. Since the durability of real estate inhibits cities from easily adapting to changing economic conditions, non-optimal land use patterns may emerge and persist over time. Using the destruction from the 1906 San Francisco fire as a laboratory, this study seeks to understand the role of durable capital and transaction costs in determining urban development patterns. All else equal, significant differences between pre- and post-disaster land use imply that the durability and specificity of real estate, and the transaction costs associated with adapting cities to contemporary needs, are important barriers to redevelopment. The disaster mitigates such barriers through the razing of over 28,000 buildings. Exploiting the border discontinuity in fire treatment using a unique data source, this study finds evidence of significant changes in the city's land use between 1899 and 1915, much of which is explained by the fire’s destruction. Specifically, residential density increases significantly in areas razed by fire relative to unburned areas, and is accompanied by a relative shift in land acreage away from residential and mixed uses. This finding implies that thriving cities may be constrained by past capital investment, suggesting a vital role for path dependence and institutions in understanding urban development.
