Exploring the impacts of flood insurance reform on vulnerable communities

This paper identifies geographic areas whose real estate markets were potentially impacted by US flood insurance reform, and it explores concurrent vulnerabilities-by income and race-in the most impacted areas. Because of the geographic and demographic significance of the Gulf Coast in terms of flood risk, flood insurance, and vulnerability, the Houston-Galveston region was selected for analysis. Flood insurance reform under the Biggert-Waters Flood Insurance Reform Act of 2012 occurred unabated over a 21-month period from July 2012 to March 2014. This period represents a unique real-world intervention that can be analyzed using a quasi-experimental design. The period was characterized by numerous anecdotal reports of spiking flood insurance rates and market uncertainty. Market data were gathered for two years before and two years after Biggert-Waters in Harris and Galveston Counties. Paired z-tests were performed to examine before and after market differences. Findings showed 17 zip codes that experienced significant impacts (p<0.01 in 14 zip codes, p<0.05 in 3 zip codes). Among the significantly impacted zip codes, low-income households were overrepresented by 11% in Harris County and by 32% in Galveston County; and minorities were overrepresented by 43% in Galveston. These results support the hypothesis that flood insurance reform can have disproportionate impacts. The paper provides a straightforward approach for analyzing the real estate market impacts of flood insurance reform at a community scale. It also provides a basis for recommending that regulatory decisions involving flood insurance must be informed by an analysis of disproportionate impacts.