Flood Risk Discounts: Evidence from Housing Market in Harris County, Texas

Coastal communities continue to face escalating flood risks due to changing climate patterns, yet conventional flood risk maps fail to communicate these dynamic threats effectively. This study examines the capitalization of baseline Federal Emergency Management Agency’s (FEMA) 100-year floodplains and continuous probability-based flood hazard information into property values following Hurricane Harvey in Harris County, Texas. Using a repeat-sales model, we analyze price changes within the same properties before and after Hurricane Harvey employing a quasi-experimental difference-in-difference estimation strategy. Our findings reveal that inundated properties within the 100-year floodplain experienced a price discount of approximately 10.8% post-Harvey compared to non-inundated properties outside the SFHA. Using hazard probability as a metric for risk, we estimated that a one-unit increase (i.e., shifting from lowest to the highest modeled exceedance probability) and for flooded homes is associated with an additional 37% decline in sale price post-Harvey. This divergence between the estimates demonstrates that while floodplain boundaries influence prices, the market also responds strongly to granular, probability-based hazard information when it is made salient by a catastrophic event. These findings emphasize the need for refined risk communication and assessment tools to better inform mitigation and adaptation decisions.