Flood risk and the U.S. housing market

Flooding is the most frequent and costliest natural disaster in the United States, yet most households are uninsured or underinsured against flood and may incorrectly expect that government agencies provide sufficient post-flood assistance.

This paper first describes the nature of flood risk in the United States and how flood risk is modeled. The authors then turn to a discussion of how flood insurance is currently provided and how take-up rates could be expanded. This is followed by a discussion of cognitive biases that influence decisions on flood risk insurance purchase. Following these sections, they discuss the impacts of flood risk on mortgage and housing markets, including housing prices. The paper concludes with a summary of the key findings, policy options, and a roadmap for future research.