Risk Disclosure and Home Prices: Evidence from California Wildfire Hazard Zones

This RFF working 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.

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Date

June 1, 2023

Authors

Lala Ma, Margaret A. Walls, Matthew Wibbenmeyer, and Connor Lennon

Publication

Working Paper

Reading time

1 minute

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 the Zillow ZTRAX program in California from 2015 through 2022, we find that, on average, homes that faced disclosure requirements sold for approximately 4.3 percent less than nearby homes that did not. Price impacts are higher in recent years, following several damaging wildfires. Our findings highlight the use of disclosure regulations to ensure that disaster risks are reflected in housing markets.

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Risk Disclosure and Home Prices: Evidence from California Wildfire Hazard Zones

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Topics

Authors

Lala Ma

Associate Professor of Economics, University of Kentucky

Margaret A. Walls

Senior Fellow; Director, Climate Risks and Resilience Program

Margaret Walls is a senior fellow at RFF. Her current research focuses on issues related to resilience and adaptation to extreme events, ecosystem services, and conservation, parks and public lands.

Matthew Wibbenmeyer

Fellow

Matthew Wibbenmeyer is a fellow at RFF. His research seeks to understand climate impacts and climate mitigation policies related to the forest and land sectors, with a special focus on wildfire.

Connor Lennon

Data Scientist/Econometrician, Colaberry

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