Homes In U.S. Flood Zones Are Vastly Overvalued

State laws that require homebuyers to be told about a property’s flood risk can help mitigate some effects of climate change by reducing the value of flood-prone properties and discouraging development in floodplains, a new study finds.

An analysis by the nonpartisan National Bureau of Economic Research shows the more that prospective buyers know about flood risk, the less they are willing to pay for a property.

“By incorporating climate risk into asset prices, markets can discourage excessive development in hazardous areas,” the study concludes.

The research has implications for federal and state officials as they struggle to minimize the growing damage from floods as climate change intensifies storm surges and extreme rainfall.

The study suggests that flood disclosure laws, which are often touted for consumer protection, can help communities avoid flood damage by making floodplain development less lucrative.

“This benefits the broader public by ensuring we’re not constantly rebuilding housing and infrastructure that’s at risk,” said Joel Scata, a water and climate attorney with the Natural Resources Defense Council, which supports flood disclosure. “Having good disclosure laws in this country is vital to getting information into people’s hands that they can use to make smart decisions about where to live and how to live.”