2002 World Congress of Environmental and Resource Economists

In 1998, California passed the Natural Hazard Disclosure Law (AB 1195), requiring home sellers to inform potential buyers of flood, wildfire and seismic hazards affecting a property. This study uses hedonic analysis to examine the effects of flood disclosure under AB 1195 on property values throughout California and to examine the variability of these price effects in relation to demographic factors. The study found that flood disclosure under AB 1195 reduced the value of the average floodplain home by roughly 4% relative to comparable floodplain homes selling before the law. Addition of interaction terms indicated that most of the negative variance due to flood disclosure was accounted for by highly Hispanic neighborhoods. This suggests not only that disclosure under the previously existing National Flood Insurance Program (NFIP) was incomplete, but that homeowners in Hispanic communities are better disclosed to under AB 1195 than under the NFIP, possibly because disclosure under the latter is triggered by financing mechanisms that may not be as prevalent in some Hispanic neighborhoods.



	Paper Title:	The Role Of Disclosure In The Flood Zone: Assessing The Price Effects Of The California Natural Hazard Disclosure Law (AB 1195)
	Presenting Author:	Austin Troy (University of Vermont)
	Coauthor 1:	Jeff Romm
	Coauthor 2:
	Coauthor 3:
	Abstract:	In 1998, California passed the Natural Hazard Disclosure Law (AB 1195), requiring home sellers to inform potential buyers of flood, wildfire and seismic hazards affecting a property. This study uses hedonic analysis to examine the effects of flood disclosure under AB 1195 on property values throughout California and to examine the variability of these price effects in relation to demographic factors. The study found that flood disclosure under AB 1195 reduced the value of the average floodplain home by roughly 4% relative to comparable floodplain homes selling before the law. Addition of interaction terms indicated that most of the negative variance due to flood disclosure was accounted for by highly Hispanic neighborhoods. This suggests not only that disclosure under the previously existing National Flood Insurance Program (NFIP) was incomplete, but that homeowners in Hispanic communities are better disclosed to under AB 1195 than under the NFIP, possibly because disclosure under the latter is triggered by financing mechanisms that may not be as prevalent in some Hispanic neighborhoods.
	Link to paper:	Not available

	Session / Day / Time	15A / Thursday / 10:15 - 11:45 am

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