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Assessing the price effects of flood hazard disclosure under the California natural hazard disclosure law (AB 1195)

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  • Austin Troy
  • Jeff Romm
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    Abstract

    This study uses hedonic analysis to estimate the effects of flood hazard disclosure under the 1998 California Natural Hazard Disclosure Law (AB 1195) on property values throughout California. It finds that the average floodplain home sold for 4.2% less than a comparable non-floodplain home following AB 1195 while before that law there was no significant price differential. The introduction of interaction terms indicates that the magnitude of the price reduction due to AB 1195 varies positively with Hispanic population share. An average floodplain home in a half-Hispanic neighbourhood saw a $12 324 negative capitalization due to AB 1195, while that amount was only $2191 for a neighbourhood with 10% Hispanic residents. Results suggest that, in particular, homebuyers in Hispanic communities are better disclosed to under AB 1195 than they were under the National Flood Insurance Program (NFIP), which was the primary policy regulating flood disclosure in California prior to passage of AB 1195.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/0964056042000189844
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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Journal of Environmental Planning and Management.

    Volume (Year): 47 (2004)
    Issue (Month): 1 ()
    Pages: 137-162

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    Handle: RePEc:taf:jenpmg:v:47:y:2004:i:1:p:137-162

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    Cited by:
    1. Kellenberg, Derek K. & Mobarak, Ahmed Mushfiq, 2008. "Does rising income increase or decrease damage risk from natural disasters?," Journal of Urban Economics, Elsevier, vol. 63(3), pages 788-802, May.
    2. Vanessa E. Daniel & Raymond J.G.M. Florax & Piet Rietveld, 2007. "Flooding Risk And Housing Values: An Economic Assessment Of Environmental Hazard," Working Papers 07-02, Purdue University, College of Agriculture, Department of Agricultural Economics.
    3. Samarasinghe, Oshadhi & Sharp, Basil M.H., 2008. "Flood prone risk and amenity values: a spatial hedonic analysis," 2008 Conference (52nd), February 5-8, 2008, Canberra, Australia 6013, Australian Agricultural and Resource Economics Society.
    4. Ellen Hanak & Georgina Moreno, 2008. "California Coastal Management with a Changing Climate," PPIC Research Reports, Public Policy Institute of California, number coacli.
    5. Bin, Okmyung & Landry, Craig E., 2013. "Changes in implicit flood risk premiums: Empirical evidence from the housing market," Journal of Environmental Economics and Management, Elsevier, vol. 65(3), pages 361-376.
    6. Luechinger, Simon & Raschky, Paul A., 2009. "Valuing flood disasters using the life satisfaction approach," Journal of Public Economics, Elsevier, vol. 93(3-4), pages 620-633, April.

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