Housing market responses to mandatory flood risk disclosure

Flooding represents a major natural hazard with significant economic consequences. We study the causal effect of the introduction of a mandatory flood risk disclosure policy in Flanders in 2013, which introduced explicit flood risk labels in property listings. Leveraging extensive transaction data and employing Difference-in-Differences (DiD) and Difference-in-Discontinuity (Diff-in-Disc) methods, we assess the policy's influence on housing prices. Our results reveal that properties located in potential flood risk zones experienced price declines of up to 4.71%, suggesting heightened market sensitivity to disclosed flood risks. However, for properties in effective flood risk zones, we find no consistent impact, likely reflecting existing awareness of flood exposure. These findings highlight the effectiveness of mandatory disclosure in mitigating information asymmetries and contribute to the broader discourse on environmental risk communication and housing market behavior.