The Impact of Special Flood Hazard Area Designation on Residential Property Values

Floodplains in the United States are designated by the federal government as special flood hazard areas (SFHA). There is a dearth of published work on the effect of SFHA designation on property values in noncoastal areas. This research note addresses this lacuna by analyzing home sales prices in St. Louis County, Missouri. A hedonic model with correction for spatial autocorrelation indicates that being located in a SFHA reduces the value of a property by about 8.6%, including both direct and indirect effects. This information is relevant to ongoing policy discussions regarding weakened levee systems in the United States.