Studies from Boston University Yield New Information about Investment (Potential Benefits In Remapping the Special Flood Hazard Area: Evidence From the Us Housing Market): Investment

2024 FEB 23 (NewsRx) -- By a News Reporter-Staff News Editor at NewsRx Policy and Law Daily -- Researchers detail new data in Investment. According to news originating from Boston, Massachusetts, by NewsRx correspondents, research stated, “A typical U.S. homebuyer’s understanding of whether a property faces flood risk is based on whether the property is located inside the National Flood Insurance Program’s (NFIP) Special Flood Hazard Area (SFHA). The SFHA boundary, however, may bias homebuyers’ perceptions of flood risk relative to unobserved true risk because the SFHA is an incomplete, and sometimes inaccurate, representation of flood hazards.”

Financial supporters for this research include Boston University, United States Department of Energy (DOE).

Our news journalists obtained a quote from the research from Boston University, “Using a national dataset of property transactions, flood hazard data from the First Street Foundation, state-level measures of flood disclosure laws, and a spatially restricted triple-difference design, we distinguish capitalization effects of policydriven (SFHA) versus quasi-objective (First Street) indicators of flood hazard. We identify these effects by assessing thousands of local spatial interactions between property SFHA designations, measures of quasiobjective flood hazard, and being in a state that mandates flood history disclosures. Being inside the SFHA generates a risk discount, but the signal is muted relative to underlying hazard exposure. Further, the SFHA signal can result in inefficient discounts for properties erroneously mapped in the SFHA. Disclosure requirements about flood history accentuate price effects for hazardous properties and result in more adequate risk internalization. In the absence of disclosures, however, we find either no or a weak risk signal for houses outside the SFHA that face flood hazard.”

According to the news editors, the research concluded: “Our results highlight potential benefits of updating SFHA boundaries to include all houses that may experience flooding, and argue in favor of requiring flood-related disclosures from sellers to improve the market’s ability to internalize flood risk.”

This research has been peer-reviewed.

For more information on this research see: Potential Benefits In Remapping the Special Flood Hazard Area: Evidence From the Us Housing Market. Journal of Housing Economics, 2023;61. Journal of Housing Economics can be contacted at: Academic Press Inc Elsevier Science, 525 B St, Ste 1900, San Diego, CA 92101-4495, USA. (Elsevier - www.elsevier.com; Journal of Housing Economics - http://www.journals.elsevier.com/journal-of-housing-economics/)

The news correspondents report that additional information may be obtained from Adam B. Pollack, Boston University, Dept. of Earth and Environment, Boston, MA 02215, United States. Additional authors for this research include Christoph Nolte, Ian Sue Wing and Douglas H. Wrenn.

The direct object identifier (DOI) for that additional information is: https://doi.org/10.1016/j.jhe.2023.101956. This DOI is a link to an online electronic document that is either free or for purchase, and can be your direct source for a journal article and its citation.

(Our reports deliver fact-based news of research and discoveries from around the world.)