Who is paying the bill for flooding? The impact of flooding on housing markets and households in New South Wales, Australia

Jian Liang, Chyi Lin Lee, Yunhe Cheng, Franz Fuerst and Matthew Ng

ERES from European Real Estate Society (ERES)

Abstract: This study examines the heterogeneous impact of flooding, if any, on housing prices, rental markets, and household financial conditions, with a particular focus on lower-income households in New South Wales, Australia. Using a Spatial Difference-in-Differences (SDID) approach to housing and household-level financial data, we assess changes in housing prices, rental markets, and household expenditures in flood-affected areas, focusing on the March 2021 flood event. Specifically, it examines its disproportionate effects, if any, on low-income households, particularly renters, for the first time. Our results reveal that while the direct impact on property sale prices is statistically insignificant, rental prices increased by 2.7% to 3%, with the most significant effect observed in the lower-end rental market. This can be attributed to supply shortages and landlords passing repair costs onto tenants. Specifically, owner-occupiers faced a significant rise in home repair and insurance expenses, while renters experienced increased housing costs without direct repair liabilities. Additionally, vacancy rates in flooded areas declined by 10.7% to 15.7%, with rental market pressures particularly affecting lower-income households. Results here suggest that lower-income households, particularly renters, were disproportionately affected by the flooding events. The study highlights critical policy implications, including improved flood risk awareness, better tenant regulatory protection, and integrating climate resilience into housing affordability strategies.

Keywords: Flooding; Housing Markets; spatial DID; Sydney (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2025-01-01
New Economics Papers: this item is included in nep-env and nep-mac
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