The Price and Distributional Impact of Flood Risk Disclosure: Evidence from US Housing Platforms — by Stephen B. Billings, Sophie Calder-Wang, Weiling Liu
How does information disclosure reshape the allocation of environmental risk in the housing market? We quantify the price and distributional impact of the nationwide disclosure of property-level flood risk from First Street on U.S. housing platforms. Using a difference-in-RD design that exploits discrete cutoffs in the disclosed risk categories, we find that homes labeled as “extreme” flood risk experience a 3.3% price discount and stay on the market for a week longer, relative to those labeled as “severe” risk. These effects are strongest for coastal properties and remain pervasive across different FEMA floodplain designations. Disclosure also generates significant household resorting: buyers of extreme-risk homes have 5.3% lower income, are more likely to use FHA financing, and are older. Through a discrete choice model, we find that the redistribution of risk to lower-income households is primarily driven by price changes rather than heterogeneous preferences for flood risk.
