Climate change, flood risk, and property values: Evidence from New York City

Applying a hedonic difference-in-differences framework to a census of residential property transactions in New York City 2003-2016.5, we estimate the effects of 3 flood risk signals: 1) the Biggert-Waters Flood Insurance Reform Act of 2012, which increased premiums; 2) Hurricane Sandy; and 3) new FEMA floodplain maps. On average each signal decreases sale prices by approximately 5 percent. Properties for which a signal provides more new information exhibit larger effects: for properties not flooded by Sandy but included in the new floodplain, sale prices fall approximately 12 to nearly 23 percent. Informed by a theoretical model, we decompose our reduced-form treatment effects into the costs of insurance premium changes and updating, finding that new maps (an information signal) induce belief changes broadly comparable to those from insurance reform (a price signal). Using Google data, we document increases in flood-related search intensity coincident with flood risk signals.