FLOODING RISK AND HOUSING VALUES: AN ECONOMIC ASSESSMENT OF ENVIRONMENTAL HAZARD

Climate change, the ?boom and bust? cycles of rivers, and altered water resourcemanagement practice have caused significant changes in the spatial distribution of the risk offlooding. Hedonic pricing studies, predominantly for the US, have assessed the spatial incidenceof risk and the associated implicit price of flooding risk. Using these implicit price estimates andtheir associated standard errors, we perform a meta-analysis and find that houses located in the100-year floodplain have a ?0.3 to ?0.8% lower price. The actual occurrence of a flooding eventor increased stringency in disclosure rules causes ex ante prices to differ from ex post prices, butthese effects are small. The marginal willingness to pay for reduced risk exposure has increasedover time, and it is slightly lower for areas with a higher per capita income. We show thatobfuscating amenity effects and risk exposure associated with proximity to water causessystematic bias in the implicit price of flooding risk.