Valuation of Flood Risk in Coastal Housing Markets: Evidence from Tampa Bay

Abstract

Florida exhibits growing tension between urban population growth and increasing exposure to coastal flooding risk. More than half of the state’s municipalities are threatened by chronic flooding, and in recent years the insurance market has been characterized by rising premiums and insurer withdrawals. Despite these signs, the Tampa Bay region remains one of the fastest-growing metropolitan areas in the United States. This raises questions about whether housing markets are adequately incorporating flood risk into property values.

While a flood risk discount on home prices has been observed in other places around the world, previous analysis of Florida finds that the desirability of coastal areas outweighs potential risks in the eyes of home buyers. This study uses a hedonic pricing framework and OLS regression to examine how flood risk is capitalized into housing prices in Tampa Bay using a dataset of home sales in Hillsborough County from 2022 to 2024. It reveals that homes with higher expected annual losses from coastal flooding sell at higher prices. This suggests that the desirability of coastal real estate still outweighs the financial and personal risks associated with flooding for prospective homeowners in Tampa Bay.