Annually, flooding causes more property damage in the United States than any other type of natural disaster. One of the consequences of continued urbanization is the tendency for floodplains to expand, increasing flood risks in the areas around urban streams and rivers. Hedonic modeling techniques can be used to estimate the relationship between residential housing prices and flood risks. One weakness of hedonic modeling has been incomplete controls for locational characteristics influencing a given property. In addition, relatively primitive assumptions have been employed in modeling flood risk exposures.
We use GIS tools to provide more accurate measures of flood risks, and a more thorough accounting of the locational features in the neighborhood. This has important policy implications. Once a complete hedonic model is developed, the reduction in property value attributed to an increase in flood risks can, under certain circumstances, be interpreted as the household’s willingness to pay for the reduction of flood risk. Willingness to pay estimates can in turn be used to guide policymakers as they assess community-wide benefits from flood control projects
