Abstract
We propose a theoretical framework characterizing (1) the attenuation of flood risks revealed by the flood zone designation in flood insurance rate maps and (2) the asymmetric impacts of adding versus removing flood zone status on property values. We apply spatial fixed effects models to empirically investigate the impacts of flood zone status and test the proposed theory. The results indicate that housing values decrease by more than 11% when a property is assigned into a flood zone. However, property values do not rebound when flood zone status is removed. (JEL Q51)
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