Stocks, flows, and flood insurance: A nationwide analysis of the capitalized impact of annual premium discounts on housing values

Georgic, Will C.; Klaiber, H. Allen

doi:10.1016/j.jeem.2021.102567

Cited by 6 publications

(1 citation statement)

References 45 publications

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“…In the spring of 2022, the NFIP began this process through a new pricing methodology called Risk Rating 2.0, which has modernized rate setting with premiums that more accurately reflect property-specific flood risk 16 . While it is too soon to evaluate the effect of Risk Rating 2.0 on property prices, in part because of an 18% annual cap on premium increases for existing policies, these adjustments have the potential to internalize flood costs and increase capitalization of risk 41 .…”

Section: Discussionmentioning

confidence: 99%

Unpriced climate risk and the potential consequences of overvaluation in US housing markets

et al. 2023

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Climate change impacts threaten the stability of the US housing market. In response to growing concerns that increasing costs of flooding are not fully captured in property values, we quantify the magnitude of unpriced flood risk in the housing market by comparing the empirical and economically efficient prices for properties at risk. We find that residential properties exposed to flood risk are overvalued by US$121–US$237 billion, depending on the discount rate. In general, highly overvalued properties are concentrated in counties along the coast with no flood risk disclosure laws and where there is less concern about climate change. Low-income households are at greater risk of losing home equity from price deflation, and municipalities that are heavily reliant on property taxes for revenue are vulnerable to budgetary shortfalls. The consequences of these financial risks will depend on policy choices that influence who bears the costs of climate change.

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Section: Discussionmentioning

confidence: 99%