Flood insurance reforms, housing market dynamics, and adaptation to climate risks

Hannah Hennighausen, Yanjun Liao, Christoph Nolte and Adam Pollack

Journal of Housing Economics, 2023, vol. 62, issue C

Abstract: This paper examines the impact of two nationwide reforms to the National Flood Insurance Program on both flood insurance and property markets. The 2012 and 2014 reforms aimed to phase out subsidies on flood insurance premiums. Using a difference-in-differences framework comparing treated and similar but untreated properties, we find that the reforms led to a 14.3% relative increase in the price of flood insurance, an 8.2% decrease in insurance demand, a 4.2% decrease in property prices and a 2.3% decrease in property transaction volumes. As flood risk continues to accelerate across the United States, properly pricing insurance premiums can effectively discourage households from living in risky areas, but may involve potential trade-offs such as the unintended outcome of a large drop-off in insurance coverage.

Keywords: Flood insurance; Real estate markets; Policy reform (search for similar items in EconPapers)
JEL-codes: G52 Q54 R31 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jhouse:v:62:y:2023:i:c:s1051137723000402

DOI: 10.1016/j.jhe.2023.101953

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