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Environmental Determinants of Housing Prices: The Impact of Flood Zone Status

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  • David Harrison
  • Greg T. Smersh
  • Arthur Schwartz

Abstract

This article is the winner of the Real Estate Valuation manuscript prize (sponsored by The Appraisal Institute) presented at the 2000 American Real Estate Society Annual Meeting.This study examines the valuation of homes located within 100year flood plains. Utilizing a database of 29,887 property transactions in Alachua County, Florida, the results of this investigation suggest that comparable characteristic homes located within a flood zone sell, on average, for less than homes located outside flood zones. Interestingly, the price differential is less than the present value of future flood insurance premiums. In addition, the price differential is shown to have increased since passage of the National Flood Insurance Reform Act of 1994. Finally, it appears that property tax assessors have slightly overassessed properties located in flood zones relative to those in other areas. The large database and the lengthy period of analysis (1980-1997) are much broader than that of previous research efforts.

Suggested Citation

  • David Harrison & Greg T. Smersh & Arthur Schwartz, 2001. "Environmental Determinants of Housing Prices: The Impact of Flood Zone Status," Journal of Real Estate Research, Taylor & Francis Journals, vol. 21(1-2), pages 3-20, January.
    • Handle: RePEc:taf:rjerxx:v:21:y:2001:i:1-2:p:3-20
    DOI: 10.1080/10835547.2001.12091045
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    References listed on IDEAS

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    1. Gatzlaff Dean H. & Ling David C., 1994. "Measuring Changes in Local House Prices: An Empirical Investigation of Alternative Methodologies," Journal of Urban Economics, Elsevier, vol. 35(2), pages 221-244, March.
    2. Benson, Earl D & Hansen, Julia L. & Schwartz Jr., Arthur & Smersh, Greg T., 1998. "Pricing Residential Amenities: The Value of a View," The Journal of Real Estate Finance and Economics, Springer, vol. 16(1), pages 55-73, January.
    3. Terrance R. Skantz & Thomas H. Strickland, 1987. "House Prices and a Flood Event: An Empirical Investigation of Market Efficiency," Journal of Real Estate Research, American Real Estate Society, vol. 2(2), pages 75-83.
    4. Shilling, James D. & Sirmans, C. F. & Benjamin, John D., 1989. "Flood insurance, wealth redistribution, and urban property values," Journal of Urban Economics, Elsevier, vol. 26(1), pages 43-53, July.
    5. Michel Glower & Donald R. Haurin & Patric H. Hendershott, 1998. "Selling Time and Selling Price: The Influence of Seller Motivation," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 26(4), pages 719-740, December.
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    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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