RTÉ Brainstorm – Would you buy a house with a 10% chance of flooding every year?
Whitaker Institute member Dr Tom McDermott, of SEMRU, has written an article for RTÉ Brainstorm. The piece looks at research on whether people would purchase homes with a flooding risk and the discount they would expect for doing so.
Would you buy a house with a 10% chance of flooding every year?
“The general public’s concerns about flooding have increased for many over the last 10 years, and a large majority of people expect the problem to get worse in the coming decades” Photo: RTÉ
Analysis: research has found that house buyers would expect a discount of around 31% for properties at risk of flooding
Would you be willing to buy a house with a 1% chance of flooding per year? What about a house with a 0.1% chance, or a 10% chance? And what kind of discount would you expect on the price for those properties relative to similar houses with no risk of flooding?
Economists like me are interested in the answers to these questions for two reasons. The first is that the answers help us to understand how people perceive flood risk. This tells us something about the true welfare costs of flooding, which might be very different to the financial costs. The latter are typically assessed by looking at the value of insured losses or government payouts to victims. However, these do not account for some important, but difficult to measure, impacts of flooding such as stress, disruption to everyday lives, and emotional impacts of your home being flooded, in some cases repeatedly. Continue reading…