Uninsurable or unnoticed? A vertical boundary discontinuity analysis of minor flood risk and housing prices

We examine how Japan's housing market values minor flood risk (≤0.45 m) under a uniform flood insurance system that excludes such losses. Using posted listings for owner-occupied and rental apartments in Tokyo (2015–2019), we apply a Vertical Boundary Discontinuity Design (VBDD) combined with difference-in-differences (DID) and triple-differences (DDD). VBDD exploits within-building contrasts between first-floor (1F) and second-floor (2F) units, and interacts at floor level with predicted flood depths (0 vs. 0–0.45 m) at small-area districts. DID estimates show no systematic pricing of minor flood risk. DDD indicates that, after local flood events, listing prices for owner-occupied 1F units in flood-prone areas decline by about 9.5 %, whereas rental listings show no detectable change. Our findings suggest the need for risk-based premiums for minor flooding and improved communication of localized flood risks.