Work

Asymmetric information provision and flood risk salience

Year: 2025

Type: article

Abstract: This paper examines the impact of information provision on the capitalization of flood risk in the housing market. We exploit a climate risk disclosure program and a subsequent flooding event in the Netherlands, using a difference-in-differences framework. The results indicate that annual flood risk communication letters sent to residents in flood-prone areas have minimal impact on housing prices. In contrast, a small-scale flood event triggers a 3.4 % decline in house prices, demonstrating the effectiveness of direct experience in influencing price adjustments. This price effect is short-lived and is observed only among local buyers who have access to both the letters and firsthand flood experience, while non-local buyers remain unresponsive. We also observe an increase in the time on market and listing-to-sales ratio among local buyers, alongside a rise in the renter-occupied household ratio following flood risk information provision. Small-sized, high-educated, and risk-averse families tend to relocate from the high-risk area. The results in this paper provide insights for policymakers grappling with how to reduce information asymmetry in housing markets in the face of increasing climate risks.

Source: Journal of Housing Economics

DOI: 10.1016/j.jhe.2025.102060

Authors: Dongxiao Niu, Piet Eichholtz, Nils Kok

Institutions: Maastricht School of Management, Maastricht University, Massachusetts Institute of Technology

Language: English

Topic: Housing Market and Economics

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: Sustainable cities and communities, Reduced inequalities

Open Access status: hybrid

Estimated APC paid: $3,490