The effects of floods on residential property values

The effects of floods on residential property values

van der Ven, Linde (TU Delft Civil Engineering & Geosciences)

van Bueren, Ellen (mentor)
van den Boomen, M. (graduation committee)
Taylor, Zac (graduation committee)

Delft University of Technology

Civil Engineering | Construction Management and Engineering

2023-04-25

Being both a low-lying delta and having one of the most significant mortgage-to-debt-to-GDP ratios in the world, the Dutch economy is vulnerable to damages to real estate due to floods as this could lead to large-scale householder default and ultimately destabilize their economy. Notwithstanding, a generic and widely adopted tool to assess flood risks and their subsequent effect on real estate values in practice is yet to be constructed. This research aimed to understand the potential impact of flood vulnerability on real estate values, the economic models guiding the assessment, and the subsequent role of stakeholders in maintaining the stability of the values.

A combination of quantitative and qualitative methods was employed throughout this study to answer the primary research question. First, state-of-the-art models for examining the effect of floods were explained through a literature review. Second, a framework was constructed to define flood vulnerability, including socio-economic status, disaster-bearing capabilities, and flood exposure. This enabled the quantification of flood vulnerability levels of neighborhoods in the case study. Third, qualitative methods in the form of a literature review and exploratory semi-structured interviews with stakeholders were utilized to understand their barriers, drivers, and enablers and the ensuing opportunities to contribute to maintaining the stability of real estate values.

The results indicated that the definition and usage of the parameters are vital to assess the effects of flood risks on residential real estate values. In addition, the results showed significant effects on flood vulnerability when including a subset of indicators besides flood exposure. When constructing a more accessible tool for all stakeholders, employing a more integral definition of flood vulnerability may thus be more socially just. Stakeholders may contribute to the stability of real estate values by actively adapting and incentivizing each other to similar behavior.

In addition, organized irresponsibility (i.e., stakeholders contributing to an issue without wanting to take responsibility for the caused risks) and pillarization appear to be embedded within the system in the Netherlands. Through cooperation, division of responsibilities, and taking ownership, devaluation risks may be diminished and the phenomenon of organized irresponsibility reduced. Moreover, by prolonged engagement of initiating stakeholders, a shift from short-term profit to long-term real estate values may be stimulated, potentially contributing to the prevention of enlarged social injustice due to flood risks. Within the shift towards organized responsibility, this research hints towards a vital role for both the government and insurers.

Climate Change
Flood Risk
Real Estate Values
Risk Governance
Flood Vulnerability
Residential Property

http://resolver.tudelft.nl/uuid:aeaf1eff-e681-4c69-a1c2-a164bc3a5385

Student theses

master thesis

© 2023 Linde van der Ven