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Association of State Flood Plain Managers

Association of State Flood Plain Managers Association of State Flood Plain Managers
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"Seeing is Believing? Property Prices in Inundated Areas"--a new brief from the Wharton Risk Center
Tuesday, June 23, 2015
Conclusions of the brief from the Wharton Risk Center:

"Our findings suggest that buyers of floodplain properties have a limited awareness about flood hazards, despite the federal requirement for flood insurance for floodplain properties with a federally-backed mortgage. Our results suggest that it is the result of being flooded, rather than knowing there is a potential to be flooded, that affects property prices (seeing is believing¬Ě).

"If there were an information effect associated with being located in the floodplain, one would expect to see a price reduction for non-inundated floodplain properties as well, but our results suggest that this is not the case. We did not find any price reduction for the floodplain properties when we dropped the inundated properties from the model. The non-inundated properties, including those in the floodplain, did not significantly reduce in value following the flood. In inundated areas, the price reductions vanished after about six years.

"These results offer important lessons for public risk communication. Flood risk, for instance, is often communicated using the probabilities of occurrence. However, this might not be sufficient warning for individuals who have never directly been affected by flooding to cause them to behave proactively for their protection against flood risk. Therefore, future public risk communication strategies should explicitly address those individuals who have not personally experienced a flood."




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