Licensing to Disclose: Do State Flood Risk Disclosure Laws Capitalize into Housing Values?

Abstract

Do mandatory flood risk disclosure laws affect housing prices in flood-prone areas? I exploit staggered adoption of seller disclosure requirements across 30 U.S.\ states from 1992 to 2024 in a triple-difference design, comparing housing values in high- versus low-flood-exposure counties, before and after law adoption, relative to never-treated states. Using the Zillow Home Value Index for 3,072 counties over 25 years, I find no statistically significant effect of disclosure on the relative price of flood-exposed housing (DDD coefficient: 0.0072 log points, SE = 0.0091). An event study shows flat pre-trends, validating the parallel trends assumption. A placebo test on zero-flood counties shows precisely zero effects, validating the design. These results suggest that either flood risk was already priced prior to mandated disclosure or that disclosure laws operate through channels other than aggregate price adjustment.