Fannie Mae - Federal National Mortgage Association

02/21/2024 | Press release | Distributed by Public on 02/21/2024 15:42

The Impact of 2019 Changes to Texas' Flood Disclosure Requirements on House Prices

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This paper examines the impact of a 2019 change to Texas' real estate disclosure law that introduced requirements to disclose when a property is in a moderate risk flood zone and increased the prominence of all flood-related disclosures. Using the universe of single-family arm's-length sales transactions in Texas from 2017 to 2022, we find that prices in 500-year flood zones fell 4.2 percent compared to properties outside of flood zones. Price declines following the policy are broadly observed for alternative specifications of flood risk, however the starkest effects are observed 20 months after the policy went into effect. Properties in 100-year flood zones that always had to disclose flood zone status saw no significant price changes in the months following the policy change, but subsample analysis of Harvey-impacted zip codes suggests heterogeneous effects based on previous insurance coverage and claim status, highlighting the interaction of multiple disclosure types. Additional research on flood risk disclosure mandates and salience are suggested.

The Impact of 2019 Changes to Texas' Flood Disclosure Requirements on House Prices