Racial Housing Price Differentials and Flood Risk

Abstract

Persons of color are more likely to live in high flood risk areas. African American and Hispanic individuals also tend to pay significantly more than whites for equivalent housing and there is significant spatial heterogeneity in these differentials. I measure the impact of flood zoning on racial housing price differentials using a panel of 26M repeat-sales transactions across the United States and flood maps from 1999, 2011 and 2022. I estimate price differentials by combining a repeat-sales model with plausibly exogenous changes in flood zone status over time. I find that, while persons of color pay over 3% more than white buyers for equivalent housing outside flood zones, these premiums are reduced to approximately 1% inside flood zones. Where flood risk is most salient, premiums for Black and Hispanic buyers to live in “safe” areas outside flood zones are highest, reaching close to 5%.