Is flood risk capitalised into property values?

Beltrán, Allan, Maddison, David and Elliott, Robert J R (2018) Is flood risk capitalised into property values? Ecological Economics, 146. pp. 668-685. ISSN 0921-8009

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Abstract

Economic theory suggests that, other things being equal, properties located within a floodplain should suffer a price discount. A survey of the existing evidence nonetheless reveals that this price discount lies anywhere between − 75.5% to a + 61.0% price premium. In this paper we summarise and explore the wide variation in the results to obtain ‘best’ estimates with which to guide policy. Results from our meta-analysis comprising 37 published works and 364 point estimates indicate marked differences between studies according to when and where they were conducted. For coastal regions the results show that properties located in the floodplain command higher prices; this finding is however likely to be caused by a high correlation between omitted coastal amenities and flood risk. There is moreover, evidence that publication bias affects the coastal flooding literature. Results from meta-regression analyses intended to uncover sources of heterogeneity confirm that controlling for time elapsed since the most recent flood is especially important. For inland flooding the price discount associated with location in the 100-year floodplain is − 4.6%. Although other estimates are defensible, we suggest this figure be used as a rule of thumb to determine the benefits of flood relief projects to households

Item Type:	Article
Official URL:	https://www.sciencedirect.com/science/journal/0921...
Additional Information:	© 2017 Elsevier © CC-BY-NC-ND
Divisions:	Geography & Environment
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HD Industries. Land use. Labor > HD61 Risk Management
JEL classification:	Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q5 - Environmental Economics > Q51 - Valuation of Environmental Effects Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q5 - Environmental Economics > Q54 - Climate; Natural Disasters R - Urban, Rural, and Regional Economics > R2 - Household Analysis > R21 - Housing Demand
Date Deposited:	16 Jan 2018 15:05
Last Modified:	16 Nov 2024 04:12
Funders:	National Council of Science and Technology-Mexico
URI:	http://eprints.lse.ac.uk/id/eprint/86458

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