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Boundary discontinuity, unobserved spatial heterogeneity, and flood risk analysis: application to a rural housing market

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Abstract

Increasing precipitation variability has led to growing concerns about the risk of flood in many parts of the U.S. and worldwide. This study adopts a spatial regression analysis framework based on floodplain boundary discontinuities to control for unobserved spatial heterogeneities in flood risk assessment. The empirical strategy combines spatial matching with the regression discontinuity design. Using parcel-level data from Juniata County, Pennsylvania, we find an over six percent property value reduction due to additional one-standard-deviation flood exposure as defined by the percentage of property area inside the flood zone. Specifically, given that the study region’s average single-family residential housing price is $114,684 (in 2015 USD), the estimated flood risk impact is $7056 (in 2015 USD, or 6.15%) for a one-standard-deviation increase in flood exposure. The estimate (for a rural housing market) is of a similar magnitude to several recent estimates from urban and suburban housing markets. This paper contributes to the literature as one of the first quantitative studies of flood risk impacts on rural housing markets.

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Fig. 1

source: compiled from Struyk (1971), Skantz and Strickland (1987), Speyrer and Ragas (1991), Bartosova et al. (2000), Harrison et al. (2001), Shultz and Fridgen (2001), Bin and Polasky (2004), Bin and Kruse (2006), McKenzie and Levendis (2010), Zhang et al. (2010), Bin and Landry (2013)

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Notes

  1. Note that this study uses a 1-to-1 matching procedure. An alternative approach is neighborhood matching. The latter allows a flood-prone property to match with a set of flood-free neighbors. This study chooses the former mainly because it tends to give a smaller average distance between matched property pairs.

  2. This study uses the 2016 version of the map. The floodplain map is updated from time to time. However, noticeable updates only happen when there is a major land use change or a large flood control infrastructure installed. None of these has happened during the study period in Juniata County.

  3. http://censusviewer.com/city/PA/Mifflintown, accessed on Dec 20, 2018.

  4. We define that the main structure of a property is in the flood zone if the structure centroid is in the flood zone.

  5. The VIF of an independent variable is 1/(1- R2). R2 is the goodness-of-fit by regressing the given independent variable on all the other independent variables. The minimum of a VIF is one.

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  1. Department of Business and Technology Management, New Mexico Tech, 801 Leroy Pl, Socorro, NM, 87801, USA

    Haoying Wang

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Wang, H. Boundary discontinuity, unobserved spatial heterogeneity, and flood risk analysis: application to a rural housing market. GeoJournal 87, 3473–3487 (2022). https://doi.org/10.1007/s10708-021-10434-1

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