Flood Hazards and Urban Housing Markets: The Effects of Katrina on New Orleans



This study examines the impacts on consumers’ willingness to pay for certain characteristics of housing in greater New Orleans before and after the flooding of Hurricane Katrina. Single-family home sales from January 2004 to August 2006 are collected and used in a hedonic price function to estimate the changes in the value of amenities, and structural, neighborhood and geographic characteristics, including the mean elevation of each property. Elevation, which buyers did not know for certain prior to the storm, but may now be inferred from water level marks in most neighborhoods, is found to have a positive relationship with selling prices. Results indicate that pre-Katrina, there was a premium of only 1.4% per foot in flood-prone areas, and was insignificant in areas not subject to flooding. This increased to 4.6% for flooded areas after Katrina. These findings are attributed to not only the perceived risk of flooding, but also to the potential of higher compliance costs associated with rebuilding under more stringent National Flood Insurance Program (NFIP) guidelines.


Housing markets Hedonic estimation Flooding Elevation Housing supply Katrina 


  1. Babcock, M., & Mitchell, B. (1980). Impact of flood hazard on residential property values in Galt, Ontario. Water Resources Bulletin, 16(3), 532–537.Google Scholar
  2. Bartosova, A., Clark, D. E., Novotny, V., & Taylor, K. (1999). Using GIS to Evaluate the Effects of Flood Risk on Residential Property Values. Proc. Environmental Problem Solving with Geographical Information Systems: A National Conference, U.S. EPA, September 22–24, 1999, Cincinnati, Ohio.Google Scholar
  3. Bialaszewski, D., & Newsome, B. A. (1990). Adjusting comparable sales for floodplain location: the case of Homewood, Alabama. Appraisal Journal, 58(1), 114–118.Google Scholar
  4. Bin, O., & Polasky, S. (2004). Effects of flood hazards on property values: evidence before and after hurricane Floyd. Land Economics, 80(4), 490–500. doi: 10.2307/3655805.CrossRefGoogle Scholar
  5. Brookings Institute (2007). A review of key indicators of recovery two years after Katrina: Second anniversary special. http://www.brookings.edu/reports/2007/katrinarecovery.
  6. Court, A. T. (1939). Hedonic price indexes with automotive examples. The Dynamics of Automobile Demand, New York, NY: General Motors.Google Scholar
  7. Cropper, M. L., Deck, L. B., & McConnell, K. E. (1988). On the choice of functional form for hedonic price functions. Review of Economics and Statistics, 70(4), 668–675. doi: 10.2307/1935831.CrossRefGoogle Scholar
  8. Dehring, C. A. (2006). Building codes and land values in high hazard areas. Land Economics, 82(4), 513–528.Google Scholar
  9. Early, J. F., & Sinclair, J. H. (1983). Quality adjustment in the producer price indexes. In F. F. Murray (Ed.), Studies in Income and Wealth 47 (pp. 107–145). Chicago: University of Chicago Press.Google Scholar
  10. Halvorsen, R., & Pollakowski, H. O. (1981). Choice of functional form for hedonic price equations. Journal of Urban Economics, 10(1), 37–49.CrossRefGoogle Scholar
  11. Housing and Urban Development (2006). Current housing unit damage estimates: Hurricanes Katrina, Rita, and Wilma. U. S. Department of Housing and Urban Development’s Office of Policy Development and Research.Google Scholar
  12. MacDonald, D. N., White, H. L., Taube, P. M., & Huth, W. L. (1990). Flood hazard pricing and insurance premium differentials: evidence from the housing market. The Journal of Risk and Insurance, 57(4), 654–663.CrossRefGoogle Scholar
  13. Malpezzi, S. (2003). Hedonic pricing models: A selective and applied review. In T. O. Sullivan, & K. Gibbs (Eds.), Housing Economics and Public Policy: Essays in Honor of Duncan Maclennan. Oxford, UK: Blackwell.Google Scholar
  14. Pace, R. K. (1993). Nonparametric methods with applications to hedonic models. Journal of Real Estate Finance and Economics, 7, 185–204.CrossRefGoogle Scholar
  15. Pace, R. K. (1995). Parametric, semiparametric, and nonparametric estimation of characteristic values within mass assessment and hedonic pricing models. Journal of Real Estate Finance and Economics, 11, 195–217.CrossRefGoogle Scholar
  16. Rosen, S. (1974). Hedonic prices and implicit markets: product differentiation in pure competition. Journal of Political Economy, 82, 34–55.CrossRefGoogle Scholar
  17. Shilling, J. D., Benjamin, J. D., & Sirmans, C. F. (1985). Adjusting comparable sales for floodplain location. The Appraisal Journal, 53, (3)429–437.Google Scholar
  18. Sirmans, S. G., Macpherson, D. A., & Zietz, E. N. (2005). The composition of hedonic pricing models. Journal of Real Estate Literature, 13(1), 3–43.Google Scholar
  19. Skantz, T., & Strickland, T. (1987). House prices and a flood event: an empirical investigation of market efficiency. The Journal of Real Estate Research, 2(2), 75–83.Google Scholar
  20. Speyrer, J. F., & Ragas, W. (1991). Housing prices and flood risk: an examination using spline regression. Journal of Real Estate Finance and Economics, 4, 395–407.CrossRefGoogle Scholar
  21. Troy, A., & Romm, J. (2004). Assessing the price effects of flood hazard disclosure under the california natural hazard disclosure law. Journal of Environmental Planning and Management, 47(1), 137–162.CrossRefGoogle Scholar
  22. Wallace, H. A. (1926). Comparative formland values in Iowa. Journal of Land and Public Utility Economics, 2, 385–392.CrossRefGoogle Scholar
  23. Wilkinson, R. K. (1973). House prices and the measurement of externalities. The Economic Journal, 83(329), 72–86.CrossRefGoogle Scholar
  24. Zimmerman, R. (1979). The effect of floodplain location on property values: Three Towns in Northeastern New Jersey. Water Resources Bulletin, 15(6), 1653–1661.Google Scholar

Copyright information

© Springer Science+Business Media, LLC 2008

Authors and Affiliations

  1. 1.College of BusinessSoutheastern Louisiana UniversityHammondUSA
  2. 2.Department of EconomicsLoyola UniversityNew OrleansUSA

Personalised recommendations