Mitigating Wildfire Risk on Private Property with Spatial Dependencies

This article develops a theoretical model to analyze the impact of policies to promote defensible space — the most prominent wildfire risk mitigation strategy on private property — on the overall level of defensible space in a community when homeowners’ investment decisions are spatially dependent. The model describes how spatial dependencies can arise as a result of three externalities associated with defensible space: risk externalities, visual seclusion externalities, and externalities related to the interdependence of post-fire home values. The results suggest that the impact of policy on the equilibrium level of defensible space in a community will depend on the character of the spatial dependencies between neighboring homeowners’ investments, as well as on the pre-policy equilibrium. The results also emphasize the importance of financial considerations in homeowners’ defensible space investment decision.