Flood Insurance Reforms, Housing Market Dynamics, and Adaptation to Climate Risks

In this journal article, RFF Fellow Penny Liao and her coauthors examine how two reforms to the National Flood Insurance Program have affected flood insurance and property markets.

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June 15, 2023


Hannah Hennighausen, Yanjun (Penny) Liao, Christoph Nolte, and Adam Pollack


Journal Article in Journal of Housing Economics

Reading time

1 minute


This paper examines the impact of two nationwide reforms to the National Flood Insurance Program on both flood insurance and property markets. The 2012 and 2014 reforms aimed to phase out subsidies on flood insurance premiums. Using a difference-in-differences framework comparing treated and similar but untreated properties, we find that the reforms led to a 14.3% relative increase in the price of flood insurance, an 8.2% decrease in insurance demand, a 4.2% decrease in property prices and a 2.3% decrease in property transaction volumes. As flood risk continues to accelerate across the United States, properly pricing insurance premiums can effectively discourage households from living in risky areas, but may involve potential trade-offs such as the unintended outcome of a large drop-off in insurance coverage.


Hannah Hennighausen headshot.png

Hannah Hennighausen

University of Alaska

Christoph Nolte headshot.png

Christoph Nolte

Boston University

Adam_Pollack headshot.jpg

Adam Pollack

Boston University

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