Who Gives a Dam? Capitalization of Flood Protection in Fukuoka, Japan

Large-scale flooding is becoming increasingly common due to prolonged and intensive rainfall caused by climate change. Communities have mitigated this risk by building flood protection, though it is unclear whether residents are aware of these public works or the protection they confer. We provide insight on this matter by examining whether apartment rental prices (2015 – 2019) responded to the completion of the Gokayama Dam in Fukuoka Prefecture, Japan. We find apartments protected by the Gokayama Dam experienced a 1.8% price increase relative to apartments in other floodplains after Typhoon Prapiroon hit western Japan and tested the dam. Renters used the natural disaster as a learning experience to update their perceptions of flood risk as opposed to the completion of the dam, suggesting a possible disconnect between perceptions of flood risk and objective risk. In addition, we find the benefits from flood protection were unevenly distributed with higher premiums observed in first floor units, units closer to rivers, and in areas where floodwaters are expected to exceed two meters, while rental units designed as temporary housing received no premium. Homeowners and commercial renters also benefited from the added flood protection but to an even greater extent than apartment renters. In aggregate, the Gokayama Dam provides $11.3 million in benefits to downstream apartment renters each year which offsets more than one-third the annualized cost of the dam.