The Flood Hazard and Dynamics of the Residential Land Market

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flood hazard, residential land market, capitalization

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Literature on the flood hazard/residential land market relationship is full of contradictory findings, many of which are counter-intuitive to the belief that flooding has a negative impact on house prices. This research advances a conceptual framework through which these relationships might be re-examined. Based on the expected utility model, the theoretical framework integrates the economic notion of capitalization with spatial and temporal characteristics of the flood hazard.

Four communities with different flood regimes are used to test the effect of flooding on the residential real estate market. Results show that, (1) there is an identifiable relationship between characteristics of the flood hazard and changes in house values; (2) the length of the recovery period is dependent on characteristics and expectations of flooding, attributes of the real estate market, and availability of capital to fuel recovery; and (3) dynamics of the urban market and spatial extent of the flood hazard influence these relationships. Further research is now necessary to examine these findings under different spatial, temporal, hydrological, and socio-economic conditions.

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Citation / Publisher Attribution

JAWRA Journal of the American Water Resources Association, v. 30, issue 4, p. 673-685