Open Access

Flood Risk Perception in the Housing Market and the Impact of a Major Flood Event

Hannah Hennighausen and Jordan F. Suter


The impact of flood events on flood risk perception has important implications for policy. Applying a novel dataset featuring the flooding extents from a severe event in Colorado, we disentangle inundated properties from “near misses,” defined as structures not directly flooded but located inside the 100-year floodplain. Using a triple-difference hedonic framework, we show that inundated properties inside the floodplain underwent a decrease in price after the flood, while near misses saw a relative price increase. We speculate that inundated properties are perceived as being riskier and near misses relatively less risky, suggesting the possible influence of the availability heuristic or Bayesian learning. (JEL Q54, Q58)

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