In June 2020, First Street Foundation, a climate and technology nonprofit, published the first public maps that revealed flood risk for every home and property in the contiguous U.S. They rated flood risk levels on the likelihood that a property will flood at least once in the next 30 years on a scale of 1 to 10.
The brokerage firm Redfin has since completed its own study to see if access to this flood plain risk information would influence a buyer’s behavior. The study covered locations that were largely in higher flood risk areas such as Florida, Texas and South Carolina. From October 12, 2020 to January 3, 2021, Redfin ran an experiment with 17.5 million of its users across the U.S. As prospective homebuyers searched Redfin’s listing website, Redfin would assign each of them randomly to either a group of listings that indicated the flood-risk information on each property or assigned them to a group of listings that did not indicate the flood risk information.
Redfin concluded after nine weeks that the properties the prospective home buyers were interested in that indicated the flood risk information, were less likely to view properties in higher risk locations (25% less risky overall based on the flood risk scores), compared to the other control group which did not have access to this data. Worth noting is that a bigger shift was observed in a subset of users who viewed homes with an average score of 8.5 (Severe/Extreme) prior to the study. They went on to view homes with an average score of 3.9 (Moderate) after gaining access to flood-risk data, a decrease of 54%.
Not everyone was responsive to the data. Any flood risk less than Severe (7.0) barely moved the needle on user behavior. Redfin’s chief economist Daryl Fairweather stated that most buyers are still looking predominantly at traditional factors like cost, warm weather, and lower taxes. This research was reported in Bloomberg News on September 12, 2022.
As this information becomes more readily available to commercial property investors, they could conceivably follow similar patterns and its impact could become more pronounced. We would anticipate that in lower risk areas, access to this information probably won’t make much difference; however, in areas near flood prone rivers for example, the impact could be more dramatic.