Floodplain designation and property sale prices in an urban watershed

Increasing urbanization, and the projected effects of climate change on urban streams, will put more people and properties at risk of flooding. Our study uses a repeat sales model to estimate the effect of floodplain location on single-family residential sale prices for a highly urbanized part of the Portland, Oregon metropolitan area. The most common approach used in the existing literature uses tax lot boundary to determine if a property is in a floodplain. However, flood insurance is only required in the United States if a homeowner has a federally-backed mortgage and if the residence, or a structure attached to the residence, is inside or intersects a 100-year floodplain. Using this “building footprint” approach we estimate that properties sell for, on average, 21.5% less than properties in the rest of the study area while the “tax lot” approach leads to an average estimated decline of 8.6%. A second model estimates separate effects for properties with a building footprint in or intersecting a floodplain and properties where only the tax lot is in the floodplain. Estimated effects for “tax lot only” properties in the 100-year floodplain are positive, which may be due to the amenities of stream proximity and no requirement to purchase flood insurance, while estimated coefficients for building footprint properties are negative. Using building footprint as the basis for determining if a property is in a 100- year floodplain is a much clearer signal of risk and capitalization than approaches used in the existing literature.