Flooding, Housing Prices, and Insurance: Evidence from the United States

Flooding is one of the costliest natural disasters in the United States, and a major source of flood damage is to the residential housing stock. Given the value of housing, both as a major source of household wealth and to the residential mortgage market, a long-standing literature has examined how floods impact house prices and evaluated the protective role of flood insurance. In this review, we synthesize the literature examining the impact of flood risk and flood events on housing value. We also examine research themes in the US flood insurance market including the determinants of flood insurance demand, the impact of insurance on household decisions to manage flood risk, and emerging changes to watch in the public and private flood insurance markets. We then survey key data challenges and opportunities and conclude by examining who bears the flood risk in the US housing market. As climate change is expected to change future precipitation patterns and raise sea levels, flood risk and insurance will likely be even more important for housing markets in the future.