Flood insurance, wealth redistribution, and urban property values

Abstract This paper examines the economics of the wealth transfer created by the National Flood Insurance Program (NFIP). By its very nature, NFIP is unique in that it subsidizes existing homeowners but not new construction. Thus for comparable properties, the gain captured by existing homeowners is the difference between selling prices of equivalent qualified and nonqualified properties. Using standard hedonic pricing models, we empirically test the impact of subsidized and nonsubsidized flood insurance on property values.

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