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Do Areas Affected by Flood Disasters Attract Lower-Income and Less Creditworthy Homeowners?

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  • Dimuthu Ratnadiwakara
  • Buvaneshwaran Venugopal

Abstract

In this paper, we show that areas affected by major flood disasters attract less affluent and less creditworthy homebuyers. House prices drop after a flood disaster. The households that purchased homes after a major flood disaster had 2–7% lower annual income and were 8.5% more likely to be seriously delinquent on their mortgages. We find the effects are stronger after repeated flooding incidents. Demand by minority homebuyers does not increase after the disasters. Lenders charge a higher interest rate and are more likely to securitize post-flood mortgages, which is consistent with the idea that lenders infer that the post-flood loans they originate are of lower credit quality ex-ante. Overall our results imply that more affordable house prices in flood-prone areas attract less affluent and more economically vulnerable households.

Suggested Citation

  • Dimuthu Ratnadiwakara & Buvaneshwaran Venugopal, 2020. "Do Areas Affected by Flood Disasters Attract Lower-Income and Less Creditworthy Homeowners?," Journal of Housing Research, Taylor & Francis Journals, vol. 29(S1), pages 121-143, December.
    • Handle: RePEc:taf:rjrhxx:v:29:y:2020:i:s1:p:s121-s143
    DOI: 10.1080/10527001.2020.1840246
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    Cited by:

    1. Justin Contat & Carrie Hopkins & Luis Mejia & Matthew Suandi, 2024. "When climate meets real estate: A survey of the literature," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 52(3), pages 618-659, May.
    2. Caroline Hopkins & Alexandra Marr & November Wilson, 2024. "How Does Mortgage Performance Vary Across Borrower Demographics Following a Hurricane?," FHFA Staff Working Papers 24-09, Federal Housing Finance Agency.
    3. Chuanrong Zhang & Xinba Li, 2025. "AI-Enhanced Remote Sensing of Land Transformations for Climate-Related Financial Risk Assessment in Housing Markets: A Review," Land, MDPI, vol. 14(8), pages 1-39, August.
    4. Bilal Islah & Ahmed Zoulati, 2025. "Keeping in Place After the Storm-Emergency Assistance and Evictions," Papers 2505.14548, arXiv.org, revised Nov 2025.
    5. Ando, Tomohiro & Bailey, Natalia & Rambaldi, Alicia & Shukla, Jyoti & Tirumala, Raghu & Tiwari, Piyush, 2025. "Towards sustainable housing market: A simple distributional analysis of Australia," MPRA Paper 126530, University Library of Munich, Germany.

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