FLOOD RISK AND RISK PERCEPTION: EVIDENCE FROM PROPERTY PRICES IN GEORGIA

Transcription

1 FLOOD RISK AND RISK PERCEPTION: EVIDENCE FROM PROPERTY PRICES IN GEORGIA AJITA ATREYA CIMR Climate Information for Managing Risk Local to Regional Adaption and Mitigation Strategies May 24-27, 2011 Orlando, Florida

2 CIMR 2011 objectives Address both climate variability and decadal climate change Address climate related vulnerabilities, impacts and opportunities for adaptation Mitigation of negative impacts and exploitation of positive impacts My Effort Address the impact of climate related hazard (flood event) on residential property Address the informational effect of actual floods on homeowner s perception of flood risk Determine the spatial variation in perceived flood risk

3 Damages ($billion) EFFECT OF CLIMATE CHANGE Global Warming Increase in Precipitation Sea Level Rise Major Catalyst for flood Expansion in Flood Plain United States Flood Damages (2007 constant Dollars) $50.00 $40.00 $30.00 $20.00 $10.00 Disaster related cost driven up $0.00 Years

4 RESEARCH QUESTION Increasing people s movement to floodplains poses important question Do homeowner s have accurate information about the flood risk? A precondition to prepare for and adapt to natural disaster is to understand the potential risk

5 STUDY AREA

6 DATA AND METHODOLOGY Fulton County Tax Assessors office Georgia GIS Clearing House Hedonic Regression Rosen (1974); Freeman(2003)

7 SUMMARY STATISTICS :ATLANTA Variable Obs Mean Std. Dev. Min Max Sale Price (2007 Constant Dollars) Sale year Year Built Number of Stories Bedrooms Heated Floor Nearest Distance Chattahoochee River (M) Nearest Lake Distance (M) Nearest River Distance (M)

8 RESULTS: ATLANTA Pre-1994 Flood Post-1994 Flood VARIABLES (Ln) Sale price (Ln) Sale price 100 -Year Floodplain *** ** (0.0392) (0.0382) 500-Year Floodplain (0.118) (0.104) 1994 Flood Event 1.175*** (0.0267) Flood_100yrFP *** (0.0437) Flood_500yrFP (0.117) River distance *** *** ( ) ( ) Lake distance *** *** ( ) ( ) Chattahoochee distance *** *** (0.0189) ( ) Community Fixed Effect Y Y Year Fixed Effect Y Y Structural Attributes Y Y Constant *** Observations 7,877 37,300 R-squared Robust standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1

9 Before 1994 RESULTS There was a significant discount associated with property in the 100 year floodplain No significant discount for the property in 500 year floodplain When evaluated at an average priced home($42928) the associated discounts is equivalent to 100yr floodplain= -$ yr floodplain= -$824

10 After 1994 RESULTS A significant discount is associated with property within 100 year floodplain but no significant discount is associated with property within 500 year floodplain The discount is equivalent to 100 year floodplain= -$ year floodplain= $429

11 IMPLICATIONS After 1994 flood, updating of flood hazard information took place but was limited to homeowner s in 100 year floodplain Probably due to mandatory flood insurance homeowner s discount property in 100 year floodplain but do not care about being in 500 year floodplain There was a premium associated with property within 500 year floodplain after 1994 flood There is lack of flood hazard information dissemination

12 IN FACT 500yr floodplain should not be considered a safe zone. (Failure of the levees and floodwalls caused flooding in 80% of New Orleans in 2005) Education on climate related hazards and its impact is necessary to minimize risk related to flood hazard

13 RESULTS: CITY OF EAST POINT Pre-1994 flood Post-1994 Flood VARIABLES (Ln) Saleprice (Ln) Saleprice 100 -Year Floodplain (0.0629) (0.0628) 500-Year Floodplain (0.0656) (0.065) 1994 Flood Event 0.561*** (0.0362) Flood_100yrFP (0.0725) Flood_500yrFP * (0.118) River distance ** ( ) Lake distance *** (0.0102) Chattahoochee distance * (0.372) Community Fixed Effect Y Y Year Fixed Effect Y Y Structural Attributes Y Y Constant (3.417) (1.953) Observations 1,406 4,597 R-squared Robust standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1

14 Before 1994 IMPLICATIONS No significant discount for the property in either 100 year or 500 year floodplain After 1994 A significant discount is associated with property within 500 year floodplain but no significant discount is associated with property within 100 year floodplain after 1994 flood The equivalent discount evaluated at an average valued house is -$2333

15 FINAL THOUGHTS There is lack of flood hazard information dissemination There is spatial variation in the information effect of flood event A comparison of case studies imply the need for locally tailored climate information dissemination program

16 THANK YOU

17 CITY OF EAST POINT Variable Obs. mean Std dev Mmin mas saleprice_ saleyear year_built num_storie bedrooms chat_dist lake_dist river_dist

18 FLOODPLAIN COMPARISION zone Frequency Percent cumulative zone (Atlanta) Freq. Percent Cum. A A AE AE X 4, X 36, X X Total 4, Total 37,

19 (Atlanta) (City of East Point) (Atlanta ) (City of East Point) VARIABLES sale_07 sale_07 sale_07 sale_07 fp_100yr *** *** 7.794** (0.0444) (0.0716) (0.260) (3.730) fp_500yr (0.131) (0.0814) (0.716) (23.90) flood *** 0.562*** (0.103) (0.0300) (0.0486) flood_100yrfp ** (0.0510) (0.0876) (0.0494) (0.0951) flood_500yrfp (0.143) (0.142) (0.151) (0.148) elevation *** *** ( ) ( ) ( ) ( ) river_100yr (0.0277) (0.0469) lake_100yr *** (0.0168) (0.0827) chat_100yr ** (0.0252) (0.409) chat_500yr (0.0680) (2.335) river_500yr (0.0866) (0.116) lake_500yr (0.0390) (0.364) river_dist_ *** ** *** ( ) ( ) ( ) ( ) lake_dist_ *** ** *** *** ( ) (0.0156) ( ) (0.0103) chat_dist_ *** *** *** * (0.0114) (0.345) ( ) (0.341) flood_chat *** 0.885*** (0.0111) (0.124) flood_river *** ** ( ) (0.0119) flood_lakedist *** ( ) (0.0189) Constant 2.040*** 5.800*** 1.292*** (0.337) (1.770) (0.327) (1.651) Observations 37,300 4,597 37,300 4,597

20 East Point is home to many individuals over age 60 who have lived in their homes for 20, 30, and 40 years.