Risk Disclosure and Home Prices: Evidence from California Wildfire Hazard Zones
This paper evaluates the effectiveness of disclosure requirements for homes located in areas of high wildfire risk, finding that they help ensure that disaster risks are reflected in housing markets.
Abstract
Damages from wildfires have increased dramatically in recent years. This study uses a boundary discontinuity design to estimate the effect of wildfire-hazard disclosure on house prices. Using the universe of single-family sales transactions from Zillow’s Transaction and Assessment Database in California from 2015 through 2022, we find that, on average, homes facing disclosure requirements sold for approximately 4.3% less than nearby homes that did not. Price impacts are higher in recent years, after several damaging wildfires. Our findings highlight the use of disclosure regulations to ensure that disaster risks are reflected in housing markets.
