How does early disclosure of flood risk affect housing prices and who buys risky homes?
In a new paper, we study a reform that required flood risk to be displayed directly in real estate listings, indicating whether a property lies in a high- or medium flood risk area (1/5)
The results suggest that well-designed, early-stage risk disclosure works! Especially when risks are less visible or for socioeconomically vulnerable households.
Link to the paper: papers.ssrn.com/sol3/papers.... (5/5)
Although flood maps were publicly accessible in Flanders (Belgium) prior to the reform, the policy ensured that risk information was prominently displayed in listing advertisements, making it salient early in the home-buying process (2/5)
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Using DiD and Diff-in-Disc analyses, we find that house prices fall by 4% in medium-risk zones after disclosure. In high-risk areas, effects are concentrated at flood-risk boundaries, indicating risk was already priced deep inside high-risk areas, but not near the edges (3/5)
Rental housing returns are highest for low-rent housing, after risk adjustment. Financing, informational, and reputational frictions prevent enough capital inflow in this segment, from Sven Damen, Matthijs Korevaar, and Stijn Van Nieuwerburgh https://www.nber.org/papers/w33470
We find stronger price declines in disadvantaged neighborhoods with below-median income, education or above-median unemployment. In addition, fewer buyers from disadvantaged neighborhoods purchase homes in medium-risk areas after the disclosure. (4/5)
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Happy to see this paper published in RSUE. @damensven.bsky.social and I find that subsidies for homeowners largely capitalize in house and land prices, but do not significantly affect sales of existing houses and undeveloped land, nor permits for new houses. www.sciencedirect.com/science/arti...
