1# RECORD 6e4be5daf59355440452370cc31893fbd83207932# TITLE: Assessing the Economic Benefits of Flood Defenses: A Repeat‐Sales Approach3# YEAR: 2018.0 VENUE: Risk Analysis DOI: 10.1111/risa.131364# AUTHORS: Allan Beltrán; D. Maddison; R. Elliott5# PAGES: 54 CANDIDATE TABLE PAGES (1-based): [30, 31, 34, 35, 37, 42, 43, 53, 54]6# ABSTRACT: In this article we identify the impact of the construction of flood defenses on property prices using a difference‐in‐differences repeat‐sales methodology. Our data set contains information on over 12 million individual property transactions, which is merged with GIS data identifying the spatial location and main characteristics of 1,666 flood defenses built in England between 1995 and 2014. Results suggest that at the finer 6‐digit postcode level the construction of flood defenses raises urban house prices by 12.6% to 16.7%. However, for rural properties at the slightly coarser 5‐digit postcode level the construction of defenses reduces house prices by 0.8% to 5.0%. This suggests that in certain locations the disamenity impact of flood defenses and the perceived threat of redirected flooding outweigh the benefits of reduced flood risk.789===== PAGE 1 (score 3, numeric-paren 0, table-words 0, var-words 3) =====1011 12 13Allan Beltrán, David Maddison and Robert J.R. Elliott 14Assessing the economic benefits of flood 15defenses: a repeat-sales approach 16Article (Accepted version) 17(Refereed) 18Original citation: Beltrán, Allan and Maddison, David and Elliott, Robert J. R. (2018) Assessing the 19economic benefits of flood defenses: a repeat-sales approach. Risk Analysis. ISSN 0272-4332 20 21DOI: 10.1111/risa.13136 22 23 24© 2018 Society for Risk Analysis 25 26This version available at: http://eprints.lse.ac.uk/90207/ 27Available in LSE Research Online: September 2018 28 29LSE has developed LSE Research Online so that users may access research output of the School. 30Copyright © and Moral Rights for the papers on this site are retained by the individual authors 31and/or other copyright owners. Users may download and/or print one copy of any article(s) in LSE 32Research Online to facilitate their private study or for non-commercial research. You may not 33engage in further distribution of the material or use it for any profit-making activities or any 34commercial gain. You may freely distribute the URL (http://eprints.lse.ac.uk) of the LSE Research 35Online website. 36 37 38This document is the author’s final accepted version of the journal article. There may be differences 39between this version and the published version. You are advised to consult the publisher’s version if 40you wish to cite from it.” 41 42 43For more research by LSE authors go to LSE Research Online 444546===== PAGE 30 (score 93, numeric-paren 73, table-words 1, var-words 8) =====4748 492950Table 3. Repeat-sales model: The effect of flood defences on property prices 51(Area impacted: 6-digit postcode) 1 52 53 54(1) 55 56(2) 57 58 59Variables 60All 61 62Flood Plain 63 64 65Bracket sample 66 67 68 69 70 71Bracket (B) 720.147*** 73 740.185*** 75 76 77 78(0.00153) 79 80(0.00424) 81 82(A) Type of property (see note 2) 83B*sdetached 84-0.0109*** 85 86-0.0286*** 87 88 89(0.000639) 90 91(0.00167) 92 93B*terraced 94-0.0299*** 95 96-0.0488*** 97 98 99(0.000673) 100 101(0.00173) 102 103B*flat 104-0.0313*** 105 106-0.0647*** 107 108 109(0.00142) 110 111(0.00392) 112 113B*free 1140.0510*** 115 1160.0419*** 117 118 119(0.00126) 120 121(0.00355) 122 123B*rural 1240.0241*** 125 1260.0444*** 127 128 129(0.000564) 130 131(0.00133) 132 133B*coastal 1340.0172*** 135 1360.0189*** 137 138 139(0.000442) 140 141(0.00104) 142 143B*quartile 144-0.0633*** 145 146-0.0702*** 147 148 149(0.000276) 150 151(0.000704) 152 153 154Bracket-defence sample 155 156 157 158 159 160B*Defence (D) 1610.195*** 162 1630.172*** 164 165 166 167(0.0409) 168 169(0.0419) 170 171(B) Type of property (see note 2) 172B*D*sdetached 173-0.0293 174 175-0.0100 176 177 178(0.0211) 179 180(0.0217) 181 182B*D*terraced 183-0.0662*** 184 185-0.0472** 186 187 188(0.0231) 189 190(0.0237) 191 192B*D*flat 193-0.198*** 194 195-0.170*** 196 197 198(0.0337) 199 200(0.0340) 201 202B*D*free 203-0.0226 204 205-0.0205 206 207 208(0.0273) 209 210(0.0279) 211 212B*D*rural 213-0.0141 214 215-0.0423*** 216 217 218(0.0152) 219 220(0.0155) 221 222B*D*coastal 2230.0144 224 2250.0119 226 227 228(0.0163) 229 230(0.0166) 231 232B*D*quartile 233-0.0356*** 234 235-0.0303*** 236 237 238(0.0101) 239 240(0.0103) 241 242Defence 243design 244B*D*sop 2458.39e-05 246 2477.93e-05 248 249 250(6.91e-05) 251 252(6.92e-05) 253 254B*D*length 255-2.03e-05 256 257-1.76e-05 258 259 260(2.45e-05) 261 262(2.46e-05) 263 264B*D*(sop*length) 2657.00e-09 266 2671.99e-08 268 269 270(2.28e-07) 271 272(2.29e-07) 273 274Type of defence (see note 3) 275B*D*embankment 276-0.00786 277 278-0.00370 279 280 281(0.0156) 282 283(0.0159) 284 285B*D*bridgeabt 286- 287 288- 289 290 291 292 293 294 295B*D*highground 296-0.0288 297 298-0.0274 299 300 301(0.0258) 302 303(0.0269) 304 305B*D*demount 3060.0246 307 3080.0299 309 310 311(0.0487) 312 313(0.0485) 314 315B*D*floodgate 3160.0366 317 3180.0382 319 320 321(0.0742) 322 323(0.0743) 324 325Flood 326perception 327B*D*months(sqrt) 4 328-0.00282*** 329 330-0.00310*** 331 332 333(0.000947) 334 335(0.000962) 336 337B*D*duration 3380.000234** 339 3400.000215* 341 342 343(0.000111) 344 345(0.000112) 346 347B*D*months(sqrt)4*duration 3483.79e-06 349 3505.49e-06 351 352 353(8.37e-06) 354 355(8.44e-06) 356 357(Continued) 358 359 360361362===== PAGE 31 (score 23, numeric-paren 3, table-words 4, var-words 11) =====363364 36530366Table 3.Continued 367 368Lyear (s) 369-0.000426*** 370 371-9.99e-05 372 373 374 375(2.98e-05) 376 377(7.68e-05) 378 379 380Year (t) 3810.000478*** 382 3830.000132* 384 385 386 387(2.97e-05) 388 389(7.66e-05) 390 391 392 393 394 395 396 397 398Observations 3997,217,966 400 4011,135,690 402 403 404Treated Obs. 4051,824 406 4071,794 408 409 410County FE 411YES 412 413YES 414 415 416R-squared 4170.112 418 4190.111 420 421Notes: Robust standard errors in parentheses. *, ** and *** means rejection of the null hypothesis at 422the 10%, 5% and 1% significance level. 4231 Properties impacted by the construction of a flood defence are identified using the 6-digit postcode 424area where the defence was constructed. 4252 Omitted categories are dummy variables for detached property, urban location and fluvial flood risk. 4263 The omitted category is a dummy variable for floodwall. 4274 Square root of the number of months since the previous flood with respect to the second sale. 428 429 430Column (1) indicates that for the case of detached houses in urban areas the construction of 431flood walls increases prices by 19.5% before accounting for those factors that modify the 432impact of the construction of flood defences. This seems to be the same for semi-detached 433properties. For terraced properties the capitalisation is somewhat smaller of around 12.5%. 434For the case of flats, however, following an examination of the sizes of the coefficients, it 435appears that there are no significant benefits from the construction of flood defences. Results 436in column (2) where the control group is confined to those properties located in the floodplain 437are similar except for rural areas where in column (2) the benefits from flood defences are 438around 4% smaller. 439 440From the coefficient on B*D*quartile it appears that the benefits of flood defences are 441capitalised mainly in the prices of properties in the lowest price quartile. This is plausible 442because the value of more expensive properties frequently derives not from the value of the 443structure itself but rather because of the value of the land upon which it is built. Only the 444structure is damaged through flooding.15 445 446Examination of the defence design variables shows that the standard of protection is 447statistically insignificant; even in the immediate vicinity of the flood defence, the area most 448likely to experience a benefit in terms of a reduction in the risk of flooding, there is no 449 45015 All properties include land but sometimes this land is held leasehold rather than freehold. 451452453===== PAGE 32 (score 13, numeric-paren 0, table-words 5, var-words 3) =====454455 45631457evidence that defences offering a higher standard of protection results in greater price 458increases. The coefficient estimates only hint at possibility that an increase in the standard of 459protection might increase property prices i.e. the coefficients on B*D*sop and 460B*D*(sop*length) are both positive but insignificant. Likewise, there is little evidence that 461the type of defence has a significant impact on prices. 462 463Finally, contained among the flood perception variables there is evidence to suggest that the 464benefits of flood defences are greater when there is a more recent history of flooding. 465Benefits are also greater when the most recent episode of flooding was severe. Both of these 466are as expected. 467 468We now consider a number of changes to gauge the plausibility of the underlying 469assumptions. One of these is that in the repeat sales model the only characteristic of 470properties that possibly changes between sales is the construction of a flood defence. This 471assumption is tested in Table 4 where, instead of making use of all repeat sales that bracket 472the construction of a flood defence, we use only those properties that are sold no more than 5 473years prior to the construction of the flood defence and sold again no more than 5 years after 474the construction of the flood defence. The results contained in column (1) of Table 4 based on 475the narrower time-window are very similar to those contained in column (1) of Table 3. More 476specifically, the coefficient indicating the impact of the construction of the flood defence on 477the benchmark property is still positive and statistically significant at the 1% level of 478confidence. There also continues to be strong evidence that the impact on flats is much less 479than that on other types of property, and that the impact is more pronounced for properties in 480the lowest price quartile. None of these coefficients moreover, appears dramatically different 481to what they were previously. 482 483We also investigate the consequences of the assumption of a unified market for across 484different property types and locations (Michaels and Smith, 1990). We start by distinguishing 485between flats and houses (defined as all types of property excluding flats). Analysing only 486487488===== PAGE 34 (score 186, numeric-paren 152, table-words 2, var-words 8) =====489490 49133492which is statistically significant at the 1% level of confidence but not statistically different 493from the corresponding estimate of 0.195 in column (1) in Table 3. 494Table 4. Repeat-sales model: Additional results 495(Area impacted: 6-digit postcode) 1 496 497 498 499(1) 500(2) 501(3) 502(4) 503(5) 504 505Variables 506Reduced Time 507Window 508House 509Flat 510Urban 511Rural 512(A) Type of property (see note 2) 513Bracket sample 514 515 516 517 518 519Bracket (B) 5200.147*** 5210.145*** 5220.163*** 5230.123*** 5240.269*** 525 526(0.00153) 527(0.00161) 528(0.00162) 529(0.00161) 530(0.00482) 531B*sdetached 532-0.0109*** 533-0.0163*** 534 5350.00209*** 536-0.0591*** 537 538(0.000638) 539(0.000652) 540 541(0.000713) 542(0.00141) 543B*terraced 544-0.0299*** 545-0.0365*** 546 547-0.0129*** 548-0.102*** 549 550(0.000673) 551(0.000694) 552 553(0.000740) 554(0.00160) 555B*flat 556-0.0316*** 557- 558- 559-0.0186*** 560-0.111*** 561 562(0.00142) 563 564 565(0.00151) 566(0.00465) 567B*free 5680.0510*** 5690.0595*** 5700.0418*** 5710.0462*** 5720.0939*** 573 574(0.00126) 575(0.00132) 576(0.00472) 577(0.00133) 578(0.00414) 579B*rural 5800.0241*** 5810.0306*** 582-0.0186*** 583 584 585 586(0.000564) 587(0.000583) 588(0.00218) 589 590 591B*coastal 5920.0173*** 5930.0162*** 5940.00251*** 5950.0124*** 5960.0224*** 597 598(0.000442) 599(0.000507) 600(0.000890) 601(0.000479) 602(0.00114) 603B*quartile 604-0.0633*** 605-0.0703*** 606-0.0535*** 607-0.0551*** 608-0.107*** 609 610(0.000276) 611(0.000314) 612(0.000584) 613(0.000292) 614(0.000770) 615 616Bracket-defence sample 617 618 619 620 621 622 623B*Defence (D) 6240.265*** 6250.200*** 6260.00854 6270.137*** 6280.0748 629 630 631(0.104) 632(0.0442) 633(0.0488) 634(0.0509) 635(0.1042) 636(B) Type of property (see note 2) 637B*D*sdetached 638-0.0526 639-0.0391 640- 641-0.00132 642-0.0298 643 644(0.0407) 645(0.0255) 646 647(0.0277) 648(0.0311) 649B*D*terraced 650-0.0749 651-0.0742*** 652- 653-0.0301 654-0.0520 655 656(0.0455) 657(0.0239) 658 659(0.0307) 660(0.0434) 661B*D*flat 662-0.235*** 663- 664- 665-0.167*** 666-0.00650 667 668(0.0746) 669 670 671(0.0374) 672(0.0737) 673B*D*free 674-0.0302 675-0.0298 6760.0666 677-0.0410 6780.0562 679 680(0.0207) 681(0.0286) 682(0.0760) 683(0.0284) 684(0.0443) 685B*D*rural 6860.0105 687-0.00528 688-0.0409 689- 690- 691 692(0.0291) 693(0.0161) 694(0.0441) 695 696 697B*D*coastal 6980.00540 6990.00435 700-0.0533* 7010.0232 702-0.0224 703 704(0.0352) 705(0.0183) 706(0.0317) 707(0.0204) 708(0.0245) 709B*D*quartile 710-0.0570*** 711-0.0398*** 712-0.0118* 713-0.0185 714-0.0456*** 715 716(0.0237) 717(0.0113) 718(0.0068) 719(0.0127) 720(0.0170) 721Defence_ 722desig 723B*D*sop 724-7.42e-05 7250.000240 7262.92e-05 7270.000229** 728-0.000102 729 730(6.33e-05) 731(0.000157) 732(8.43e-05) 733(0.000110) 734(7.82e-05) 735B*D*length 736-4.57e-05 737-1.18e-05 7382.31e-05 739-7.71e-06 740-1.86e-05 741 742(4.79e-05) 743(2.77e-05) 744(6.39e-05) 745(3.88e-05) 746(3.71e-05) 747B*D*(sop*length) 7484.71e-07 749-1.74e-07 750-4.13e-07 7512.68e-08 752-3.13e-07 753 754(4.05e-07) 755(2.58e-07) 756(1.06e-06) 757(3.95e-07) 758(3.42e-07) 759Type of defence (see note 3) 760B*D*embankment 761-0.0419 7620.0140 763-0.0400** 764-0.00560 765-0.0143 766 767(0.0311) 768(0.0172) 769(0.0152) 770(0.0194) 771(0.0274) 772B*D*bridgeabt 773- 774- 775- 776- 777- 778 779 780 781 782 783 784B*D*highground 785-0.0874 7860.00242 787-0.0572 788-0.0350 789-0.0411 790 791(0.0616) 792(0.0253) 793(0.0495) 794(0.0248) 795(0.0661) 796B*D*demount 797-0.0228 7980.0473 799-0.0350 800- 801-0.0319 802 803(0.0815) 804(0.0484) 805(0.0219) 806 807(0.0491) 808B*D*floodgate 809- 8100.0547 811- 812-0.104 8130.0836 814 815 816(0.0749) 817 818(0.100) 819(0.0919) 820Flood_ 821perception 822B*D*months(sqrt) 4 823-0.00362*** 824-0.00253** 825-0.00295** 826-0.00379*** 827-0.00323* 828 829(0.00123) 830(0.00103) 831(0.00138) 832(0.00113) 833(0.00171) 834B*D*duration 8350.000510*** 8360.000210* 837-9.27e-05 8388.47e-05 8390.000700*** 840 841(0.000188) 842(0.000115) 843(0.000217) 844(0.000127) 845(0.000233) 846B*D*months(sqrt)4*duration 847-1.32e-05 8484.24e-06 8491.09e-05 8508.19e-06 851-3.40e-05 852853854===== PAGE 35 (score 24, numeric-paren 10, table-words 3, var-words 5) =====855856 85734858 859(1.59e-05) 860(1.01e-05) 861(1.57e-05) 862(9.33e-06) 863(2.14e-05) 864(Continued) 865 866Table 4.Continued 867 868Lyear (s) 869-0.000425*** 870-0.00174*** -0.00681*** -0.000231*** 871-0.00189*** 872 873 874(2.98e-05) 875(3.25e-05) 876(7.18e-05) 877(3.26e-05) 878(7.45e-05) 879 880Year (t) 8810.000477*** 8820.00180*** 8830.00676*** 8840.000284*** 8850.00195*** 886 887 888(2.97e-05) 889(3.24e-05) 890(7.17e-05) 891(3.25e-05) 892(7.43e-05) 893 894 895 896 897 898 899 900 901Observations 9027,222,401 9035,802,937 9041,419,464 9055,925,246 9061,201,622 907 908Treated Obs. 909487 9101,498 911326 9121,215 913609 914 915COUNTY FE 916YES 917YES 918YES 919YES 920YES 921 922R-squared 9230.112 9240.138 9250.042 9260.113 9270.129 928Notes: Robust standard errors in parentheses. *, ** and *** means rejection of the null hypothesis at the 10%, 9295% and 1% significance level. 9301 Properties impacted by the construction of a flood defence are identified using the 6-digit postcode area 931where the defence was constructed. 9322 Omitted categories are dummy variables for detached property, urban location and fluvial flood risk. 9333 The omitted category is a dummy variable for floodwall. 9344 Square root of the number of months since the previous flood with respect to the second sale. 935 936 9376.2. Treatment group: 5-digit postcode area 938The consequences of flood defences, in terms of the reduced risk of flooding and the 939disamenity impacts, are likely to find expression at different geographical distances. Quite 940plausibly, flood-relief benefits might be experienced by those in the immediate vicinity of the 941flood defence construction, whereas disamenity impacts might occur over a somewhat wider 942area. As previously noted these disamenity impacts are likely to include visual intrusion as 943well as impacts associated with restricted access to water bodies.16 There may also be adverse 944ecosystem impacts arising out of the construction of the defences. Determining which of 945these concerns is uppermost in the mind of households however, is probably better 946investigated in other ways rather than through hedonic analysis. Furthermore, it also seems 947likely these impacts differ across contexts. For example, the visual impact of a flood defence 948will depend upon the vista and this will differ between urban and rural areas. To determine 949the true benefits of flood defence projects, it is important not to confine any analysis only to 950 95116 Very recently glass floodwalls have been installed at several sites in England. Given that these are much more 952expensive this is affirmation that visual disamenity impacts are an important issue. 953954955===== PAGE 36 (score 9, numeric-paren 0, table-words 3, var-words 3) =====956957 95835959those areas enjoying benefits from a reduced risk of flooding. Examining a larger area might 960be necessary in order to guarantee capture of other sorts of impacts.17 961 962In this sub-section we present the same regressions as in Table 3, but we now define the area 963impacted by flood defences as 5-digit postcode area in which the defence is located. That is, 964we now focus on a much larger area, one which is quite likely to include properties not 965experiencing any significant reduction in the risk of flooding but potentially suffering 966disamenity impacts.18 The results appear in Table 5. 967 968Including properties not in the immediate vicinity of the flood defence will alter the extent to 969which the impacts of flood defences are capitalised into property prices in the area under 970scrutiny. It could be that some characteristics of flood defences that enhance the benefits of 971those living in the immediate vicinity of the construction actually worsen any disamenity 972impacts felt by households at greater geographical distances from the flood defence. For 973example, whilst many households in a 5-digit postcode area might experience only 974disamenity impacts from an increase in the standard of protection i.e. taller flood defences, 975households living in the much smaller 6-digit postcode area in which the flood defence is 976situated might experience a mixture of both positive and negative impacts. This might explain 977changes in the signs of some coefficients as the focus switches from the 6-digit postcode area 978to the 5-digit postcode area. 979 980 981 982 98317 It is possible that reducing the risk of flooding in some locations might increase the risk in others in a manner 984revealed only through hydrological and hydraulic modelling. Whether this is addressed simply by expanding the 985geographical area assumed impacted by the construction of a flood defence seems doubtful. Equally doubtful is 986whether any households affected by redirected flooding would be perfectly aware of the threat. Even though the 987Environment Agency takes care to avoid such a situation some households might nevertheless perceive an 988increase in the risk of flooding. 98918 A consequence of this is a sizeable increase in the number of treated observations. 990991992===== PAGE 37 (score 100, numeric-paren 80, table-words 1, var-words 8) =====993994 99536996Table 5. Repeat-sales model: The effect of flood defences on property prices 997(Area impacted: 5-digit postcode) 1 998 999 1000(1) 1001 1002(2) 1003 1004 1005Variables 1006All 1007 1008Flood Plain 1009 1010Bracket sample 1011 1012 1013 1014 1015 1016Bracket (B) 10170.147*** 1018 10190.186*** 1020 1021 1022 1023(0.00154) 1024 1025(0.00431) 1026 1027(A) Type of property (see note 2) 1028B*sdetached 1029-0.0107*** 1030 1031-0.0280*** 1032 1033 1034(0.000641) 1035 1036(0.00169) 1037 1038B*terraced 1039-0.0295*** 1040 1041-0.0483*** 1042 1043 1044(0.000676) 1045 1046(0.00175) 1047 1048B*flat 1049-0.0307*** 1050 1051-0.0642*** 1052 1053 1054(0.00143) 1055 1056(0.00399) 1057 1058B*free 10590.0511*** 1060 10610.0409*** 1062 1063 1064(0.00127) 1065 1066(0.00362) 1067 1068B*rural 10690.0242*** 1070 10710.0455*** 1072 1073 1074(0.000568) 1075 1076(0.00135) 1077 1078B*coastal 10790.0172*** 1080 10810.0189*** 1082 1083 1084(0.000443) 1085 1086(0.00104) 1087 1088B*quartile 1089-0.0632*** 1090 1091-0.0702*** 1092 1093 1094(0.000277) 1095 1096(0.000712) 1097 1098 1099Bracket-defence sample 1100 1101 1102 1103 1104 1105B*Defence (D) 11060.0613*** 1107 11080.0490* 1109 1110 1111 1112(0.0201) 1113 1114(0.0260) 1115 1116(B) Type of property (see note 2) 1117B*D*sdetached 1118-0.0327*** 1119 1120-0.0233** 1121 1122 1123(0.00808) 1124 1125(0.0118) 1126 1127B*D*terraced 1128-0.0407*** 1129 1130-0.0281** 1131 1132 1133(0.00860) 1134 1135(0.0121) 1136 1137B*D*flat 1138-0.0711*** 1139 1140-0.0613*** 1141 1142 1143(0.0168) 1144 1145(0.0224) 1146 1147B*D*free 11480.0257* 1149 11500.0362* 1151 1152 1153(0.0154) 1154 1155(0.0203) 1156 1157B*D*rural 1158-0.00636 1159 1160-0.0332*** 1161 1162 1163(0.00606) 1164 1165(0.00894) 1166 1167B*D*coastal 11680.0688*** 1169 11700.0767*** 1171 1172 1173(0.00982) 1174 1175(0.0123) 1176 1177B*D*quartile 1178-0.0114*** 1179 1180-0.00856 1181 1182 1183(0.00376) 1184 1185(0.00523) 1186 1187Defence 1188design 1189B*D*sop 1190-6.28e-05*** 1191 1192-7.36e-05*** 1193 1194 1195(1.54e-05) 1196 1197(2.12e-05) 1198 1199B*D*length 1200-1.77e-05** 1201 1202-3.00e-05*** 1203 1204 1205(7.99e-06) 1206 1207(1.09e-05) 1208 1209B*D*(sop*length) 1210-1.50e-07*** 1211 1212-1.38e-07*** 1213 1214 1215(2.74e-08) 1216 1217(3.31e-08) 1218 1219Type of defence (see note 3) 1220B*D*embankment 1221-0.0130** 1222 1223-0.00368 1224 1225 1226(0.00587) 1227 1228(0.00822) 1229 1230B*D*bridgeabt 1231-0.0497 1232 1233-0.0522 1234 1235 1236(0.0483) 1237 1238(0.0505) 1239 1240B*D*highground 1241-0.00832 1242 1243-0.00296 1244 1245 1246(0.0121) 1247 1248(0.0164) 1249 1250B*D*demount 1251-0.0694*** 1252 1253-0.0528* 1254 1255 1256(0.0180) 1257 1258(0.0271) 1259 1260B*D*floodgate 1261-0.0125 1262 12630.0200 1264 1265 1266(0.0137) 1267 1268(0.0219) 1269 1270Flood_ 1271perception 1272B*D*months(sqrt) 4 1273-0.00124*** 1274 1275-0.00232*** 1276 1277 1278(0.000425) 1279 1280(0.000631) 1281 1282B*D*duration 12839.93e-05*** 1284 12850.000127** 1286 1287 1288(3.45e-05) 1289 1290(5.37e-05) 1291 1292B*D*months(sqrt)4*duration 12937.45e-06*** 1294 12959.63e-06** 1296 1297 1298(2.85e-06) 1299 1300(4.34e-06) 1301 1302(Continued) 1303 130413051306===== PAGE 38 (score 23, numeric-paren 2, table-words 5, var-words 10) =====13071308 1309371310Table 5.Continued 1311 1312Lyear (s) 1313-0.000421*** 1314 1315-8.34e-05 1316 1317 1318 1319(2.98e-05) 1320 1321(7.69e-05) 1322 1323 1324Year (t) 13250.000473*** 1326 13270.000116 1328 1329 1330 1331(2.98e-05) 1332 1333(7.67e-05) 1334 1335 1336 1337 1338 1339 1340 1341 1342Observations 13437,217,966 1344 13451,135,690 1346 1347 1348Treated Obs. 134914,716 1350 13517,417 1352 1353 1354County FE 1355YES 1356 1357YES 1358 1359 1360R-squared 13610.111 1362 13630.110 1364 1365Notes: Robust standard errors in parentheses. *, ** and *** means rejection of the null hypothesis at the 136610%, 5% and 1% significance level. 13671 Properties impacted by the construction of a flood defence are identified using the 5-digit postcode area 1368where the defence was constructed. 13692 Omitted categories are dummy variables for detached property, urban location and fluvial flood risk. 13703 The omitted category is a dummy variable for floodwall. 13714 Square root of the number of months since the previous flood with respect to the second sale. 1372 1373Turning now to the results for the 5-digit postcode areas, beginning with column (1), it can be 1374observed that detached properties in urban areas impacted by the construction of a floodwall 1375and threatened by fluvial flooding were resold on average, for a price 6.1% higher than those 1376properties where exposure to flood risk remained unchanged. This is before accounting for 1377those factors that modify the impact of the construction of flood defences. This coefficient is 1378moreover significant at the 1% level of confidence. At the same time however, as the sample 1379is restricted such that the comparison is made only with properties located in a floodplain in 1380column (2) the statistical significance of the coefficient diminishes. Once more the results in 1381column 2 are our preferred specification. 1382 1383Considering now the differential effects for other sorts of properties there appear to be 1384significant differences. Semi-detached properties, terraced properties and in particular flats 1385appear to enjoy significantly lower benefits compared to detached properties. Once again 1386however, as the sample is restricted the statistical significance of these differential impacts 1387slips although in the case of flats the benefits of the construction of a floodwall in an urban 1388area continue to be significantly smaller than for detached properties. 1389 139013911392===== PAGE 42 (score 148, numeric-paren 119, table-words 1, var-words 7) =====13931394 13954113965 are indeed associated with the construction of flood defences and their design 1397characteristics. 1398Table 6. Repeat-sales model. Robustness test: Placebo regression 1399 1400 1401 14026-Digit 1 14035-Digit 2 1404 1405 1406(1) 1407(2) 1408(3) 1409(4) 1410 1411Variables 1412All 1413Flood Plain 1414All 1415Flood plain 1416 1417Bracket sample 1418 1419 1420 1421 1422 1423𝐵𝑟𝑎𝑐𝑘𝑒𝑡1424̅̅̅̅̅̅̅̅̅̅̅ (𝐵̅) 14250.200*** 14260.204*** 14270.189*** 14280.194*** 1429 1430 1431(0.000838) 1432(0.00227) 1433(0.000839) 1434(0.00228) 1435(A) Type of property (see note 3) 1436𝐵̅*sdetached 1437-0.0376*** 1438-0.0462*** 1439-0.0433*** 1440-0.0519*** 1441 1442(0.000344) 1443(0.000888) 1444(0.000345) 1445(0.000891) 1446𝐵̅*terraced 1447-0.0528*** 1448-0.0616*** 1449-0.0507*** 1450-0.0595*** 1451 1452(0.000369) 1453(0.000935) 1454(0.000369) 1455(0.000939) 1456𝐵̅*flat 1457-0.0712*** 1458-0.0831*** 1459-0.0775*** 1460-0.0896*** 1461 1462(0.000639) 1463(0.00175) 1464(0.000640) 1465(0.00176) 1466𝐵̅*free 14670.0369*** 14680.0353*** 14690.0436*** 14700.0419*** 1471 1472(0.000518) 1473(0.00148) 1474(0.000520) 1475(0.00149) 1476𝐵̅*rural 14770.0265*** 14780.0419*** 14790.0224*** 14800.0378*** 1481 1482(0.000305) 1483(0.000702) 1484(0.000306) 1485(0.000707) 1486𝐵̅*coastal 14870.00418*** 14880.0131*** 14890.00385*** 14900.0128*** 1491 1492(0.000482) 1493(0.000672) 1494(0.000485) 1495(0.000676) 1496𝐵̅*quartile 1497-0.0755*** 1498-0.0775*** 1499-0.0798*** 1500-0.0818*** 1501 1502(0.000166) 1503(0.000430) 1504(0.000166) 1505(0.000431) 1506 1507Bracket-defence sample 1508 1509 1510 1511 1512 1513𝑩̅*Defence (𝑩̅*D) 15140.0163 15150.00872 1516-0.00297 1517-0.0212 1518 1519 1520(0.0288) 1521(0.0290) 1522(0.00986) 1523(0.0139) 1524(B) Type of property (see note 3) 1525𝐵̅*D*sdetached 15260.00697 15270.0172 1528-0.00344 1529-0.00181 1530 1531(0.0168) 1532(0.0171) 1533(0.00555) 1534(0.00814) 1535𝐵̅*D*terraced 15360.000853 15370.0116 1538-0.00684 15390.00102 1540 1541(0.0170) 1542(0.0172) 1543(0.00554) 1544(0.00802) 1545𝐵̅*D*flat 1546-0.0121 1547-0.00126 1548-0.0120 15490.0159 1550 1551(0.0190) 1552(0.0191) 1553(0.00754) 1554(0.0105) 1555𝐵̅*D*free 1556-0.0152 1557-0.0161 1558-0.00832 15590.00193 1560 1561(0.0143) 1562(0.0146) 1563(0.00563) 1564(0.00804) 1565𝐵̅*D*rural 15660.0132 1567-0.00876 15680.00506 1569-0.00846* 1570 1571(0.0107) 1572(0.0110) 1573(0.00353) 1574(0.00493) 1575𝐵̅*D*coastal 15760.00681 15770.00171 15780.00529 1579-0.00466 1580 1581(0.0105) 1582(0.0106) 1583(0.00422) 1584(0.00483) 1585𝐵̅*D*quartile 1586-0.00482 1587-0.00215 15880.000434 15890.00437 1590 1591(0.00631) 1592(0.00633) 1593(0.00208) 1594(0.00279) 1595Defence_ 1596design 1597𝐵̅*D*sop 1598-3.70e-05 1599-4.14e-05 16009.29e-06 1601-4.11e-06 1602 1603(3.08e-05) 1604(3.06e-05) 1605(8.17e-06) 1606(1.12e-05) 1607𝐵̅*D*length 1608-1.44e-05 1609-1.18e-05 1610-7.75e-06 1611-7.09e-06 1612 1613(1.73e-05) 1614(1.71e-05) 1615(4.98e-06) 1616(6.53e-06) 1617𝐵̅*D*(sop*length) 16182.07e-07 16192.00e-07 16204.77e-09 16213.14e-08 1622 1623(1.48e-07) 1624(1.48e-07) 1625(2.29e-08) 1626(2.89e-08) 1627Type of defence (see note 4) 1628𝐵̅*D*embankment 1629-0.0135 1630-0.00818 1631-0.00508 16320.00166 1633 1634(0.00892) 1635(0.00902) 1636(0.00331) 1637(0.00445) 1638𝐵̅*D*bridgeabt 1639- 1640- 1641-0.0150 1642-0.0121 1643 1644 1645 1646(0.0179) 1647(0.0229) 1648𝐵̅*D*highground 1649-0.0161 1650-0.00227 1651-0.00862 16520.00669 1653 1654(0.0247) 1655(0.0272) 1656(0.00588) 1657(0.00959) 1658𝐵̅*D*demount 16590.00526 16600.00918 1661-0.00896 16620.00855 1663 1664(0.0390) 1665(0.0392) 1666(0.0185) 1667(0.0244) 1668𝐵̅*D*floodgate 1669-0.0336 1670-0.0292 16710.00609 16720.0113 1673 1674(0.0297) 1675(0.0291) 1676(0.00847) 1677(0.0110) 1678Floo1679d_ 1680perce1681ti1682𝐵̅*D*months(sqrt) 5 16830.000439 16848.43e-05 16850.000307 16860.000181 1687 1688(0.000679) 1689(0.000700) 1690(0.000219) 1691(0.000326) 1692𝐵̅*D*duration 16936.48e-05 16945.15e-05 16951.52e-05 1696-3.66e-05 169716981699===== PAGE 43 (score 27, numeric-paren 8, table-words 5, var-words 6) =====17001701 1702421703 1704(5.88e-05) 1705(6.03e-05) 1706(2.16e-05) 1707(3.06e-05) 1708𝐵̅*D*months(sqrt)5*duration 1709-5.06e-06 1710-3.45e-06 1711-8.15e-07 17121.27e-06 1713 1714(4.21e-06) 1715(4.24e-06) 1716(1.53e-06) 1717(2.19e-06) 1718(Continued) 1719Table 6.Continued 1720 1721Lyear (s) 1722-0.00159*** 1723-0.00141*** 1724-0.00159*** 1725-0.00141*** 1726 1727 1728(2.94e-05) 1729(7.57e-05) 1730(2.94e-05) 1731(7.57e-05) 1732 1733Year (t) 17340.00162*** 17350.00144*** 17360.00162*** 17370.00144*** 1738 1739 1740(2.93e-05) 1741(7.54e-05) 1742(2.92e-05) 1743(7.54e-05) 1744 1745 1746 1747 1748 1749 1750 1751Observations 17521,030,068 1753107,537 17541,030,068 1755107,537 1756 1757Treated Obs. 17582,502 17592,459 176020,440 176110,415 1762 1763County FE 1764YES 1765YES 1766YES 1767YES 1768 1769R-squared 17700.173 17710.170 17720.149 17730.147 1774Notes: Robust standard errors in parentheses. *, ** and *** means rejection of the null hypothesis at the 10%, 17755% and 1% significance level. 17761 Properties located impacted by the construction of a flood defence are identified using the 6-digit postcode 1777area where the defence was constructed. 17782 Properties impacted by the construction of a flood defence are identified using the 5-digit postcode area 1779where the defence was constructed. 17803 Omitted categories are dummy variables for detached property, urban location and fluvial flood risk. 17814 The omitted category is a dummy variable for floodwall. 17825 Square root of the number of months since the previous flood with respect to the second sale. 1783 1784 17857. Interpretation of Results 1786From the results given in column (2) of Tables 3 and 5 it is possible to estimate the typical 1787effect on prices of the construction of flood defences inter alia for fluvial and coastal 1788flooding as well as for urban and rural properties and for different types of properties.20 1789Results corresponding to sample average values appear in Table 7. For the case of flats we 1790report estimates only for urban areas since few flats are found elsewhere. We present separate 1791estimates for 5-digit and 6-digit postcode areas. 1792 1793The results in Table 7 suggest that the overall effect of the construction of flood defences on 1794property prices varies considerably, ranging from a price increase of 16.7% for houses in 6-1795digit postcode urban areas protected to a decrease of 5.7% for flats in 5-digit postcode urban 1796areas. Furthermore, providing flood protection appears to result in a price decrease of 1797between 0.8 and 5.0% for houses located in rural 5-digit postcode areas, something we 1798suggest is the result of the disamenity impacts of flood defences outweighing the benefits of 1799 180020 For areas exposed to fluvial flood risk, there is an average of 188 months with respect to the previous flood, 1801with and average duration of 58 days. For areas exposed to coastal flood risk, the average months with respect to 1802the previous flood is 177 months, with an average duration of 32 days. 180318041805===== PAGE 44 (score 11, numeric-paren 0, table-words 3, var-words 5) =====18061807 1808431809flood protection. However, in 6-digit postcodes in rural areas the reverse is true; the benefits 1810of flood protection appear to outweigh any disamenity impacts presumed present. 1811 1812Table 7. Capitalisation of flood defences into property prices in England, 1996-2014 1813(95% confidence interval and mean capitalisation rate in parentheses) 1814 1815Type of property 1816Fluvial risk 1817Coastal risk 18186-digit 1819postcode 1820House 1821Urban 1822£28,829*** 1823[£12,676 – £45,029] 1824£45,420*** 1825[£20,521 – £70,675] 1826(12.6%) 1827(16.7%) 1828Rural 1829£14,804* 1830[-£2,768 – £32,399] 1831£28,784** 1832[£2,736 – £54,723] 1833(6.5%) 1834(10.5%) 1835Flat 1836Urban 1837-£8,290* 1838[-£17,340 – £760] 1839-£576 1840[-£14,165 – £13,006] 1841(-4.4%) 1842(-0.3%) 18435-digit 1844postcode 1845House 1846Urban 1847£3,203 1848[-£6,635 – £13,042] 1849£15,048** 1850[£1,833 – £28,511] 1851(1.4%) 1852(5.5%) 1853Rural 1854-£11,509** 1855[-£22,125 – -£915] 1856-£2,326 1857[-£16,937 – £12,230] 1858(-5.0%) 1859(-0.8%) 1860 1861Flat 1862Urban 1863-£10,819*** 1864[-£15,858 – -£5,780] 1865-£2,852 1866[-£9,127 – £3,460] 1867 1868(-5.7%) 1869(-1.5%) 1870Note: These estimates are based on column (2) in both Table 3 and 5. The monetary values are 1871calculated using the sample average price of a house located in a fluvial or coastal flood risk 1872area: £228,804 and £273,617, respectively. For the case of flats we use the average price of 1873£190,142 for a flat located in a fluvial floor risk area. 95% confidence interval appears in 1874brackets. Mean capitalisation rate appears in parentheses. *, ** and *** means rejection of the null 1875hypothesis at the 10%, 5% and 1% significance level. All prices are in July 2014 GBP. 1876 1877 1878Finally, the construction of flood defences always results in a decrease in the price of flats 1879ranging from 0.3 to 5.7%. We suggest that this is the result of two aforementioned effects: 1880lower or no benefits from flood protection and the disamenity impact of flood defences. 1881 1882Before closing, it is worth reiterating that the rates of capitalisation in Table 7 are based on 1883the perceived change in the level of the risk of flooding. Obviously it would be interesting to 1884investigate the extent to which the change in objective risk brought about by flood protection 1885is perceived by homeowners. Furthermore, if there is to begin with a lack of perception of 1886flood risk in an area then the construction of a flood defence itself conveys information. This 1887might result in a situation in which the construction of a flood defence actually reduces 188818891890===== PAGE 53 (score 181, numeric-paren 149, table-words 2, var-words 7) =====18911892 1893521894Table A2. Repeat-sales model. Robustness test: Excludes extreme values 1895(Excludes top 1% and bottom 1% of observations) 1896 1897 18986-Digit 1 18995-Digit 2 1900 1901 1902(1) 1903(2) 1904(3) 1905(4) 1906 1907Variables 1908All 1909Flood Plain 1910All 1911Flood Plain 1912 1913Bracket sample 1914 1915 1916 1917 1918 1919Bracket (B) 19200.166*** 19210.199*** 19220.165*** 19230.199*** 1924 1925 1926(0.00144) 1927(0.00407) 1928(0.00145) 1929(0.00413) 1930(A) Type of property (see note 2) 1931B*sdetached 1932-0.0105*** 1933-0.0278*** 1934-0.0103*** 1935-0.0270*** 1936 1937(0.000619) 1938(0.00163) 1939(0.000621) 1940(0.00164) 1941B*terraced 1942-0.0251*** 1943-0.0466*** 1944-0.0247*** 1945-0.0461*** 1946 1947(0.000653) 1948(0.00169) 1949(0.000656) 1950(0.00171) 1951B*flat 1952-0.0383*** 1953-0.0654*** 1954-0.0377*** 1955-0.0650*** 1956 1957(0.00133) 1958(0.00374) 1959(0.00134) 1960(0.00380) 1961B*free 19620.0416*** 19630.0355*** 19640.0415*** 19650.0343*** 1966 1967(0.00117) 1968(0.00336) 1969(0.00117) 1970(0.00342) 1971B*rural 19720.0241*** 19730.0454*** 19740.0242*** 19750.0465*** 1976 1977(0.000546) 1978(0.00129) 1979(0.000550) 1980(0.00131) 1981B*coastal 19820.0193*** 19830.0198*** 19840.0193*** 19850.0198*** 1986 1987(0.000427) 1988(0.00101) 1989(0.000427) 1990(0.00102) 1991B*quartile 1992-0.0673*** 1993-0.0737*** 1994-0.0672*** 1995-0.0737*** 1996 1997(0.000269) 1998(0.000692) 1999(0.000270) 2000(0.000700) 2001 2002Bracket-defence sample 2003 2004 2005 2006 2007 2008B*Defence (D) 20090.207*** 20100.194*** 20110.0527*** 20120.0418* 2013 2014 2015(0.0390) 2016(0.0399) 2017(0.0196) 2018(0.0258) 2019(B) Type of property (see note 2) 2020B*D*sdetached 2021-0.0308 2022-0.0123 2023-0.0343*** 2024-0.0253** 2025 2026(0.0204) 2027(0.0209) 2028(0.00782) 2029(0.0114) 2030B*D*terraced 2031-0.0699*** 2032-0.0494** 2033-0.0425*** 2034-0.0281** 2035 2036(0.0218) 2037(0.0224) 2038(0.00828) 2039(0.0116) 2040B*D*flat 2041-0.202*** 2042-0.181*** 2043-0.0638*** 2044-0.0515** 2045 2046(0.0321) 2047(0.0324) 2048(0.0164) 2049(0.0221) 2050B*D*free 2051-0.0241 2052-0.0264 20530.0355** 20540.0508** 2055 2056(0.0257) 2057(0.0264) 2058(0.0151) 2059(0.0202) 2060B*D*rural 2061-0.0177 2062-0.0475*** 2063-0.00669 2064-0.0364*** 2065 2066(0.0146) 2067(0.0149) 2068(0.00588) 2069(0.00868) 2070B*D*coastal 20710.0123 20720.0107 20730.0659*** 20740.0774*** 2075 2076(0.0161) 2077(0.0164) 2078(0.00979) 2079(0.0122) 2080B*D*quartile 2081-0.0363*** 2082-0.0320*** 2083-0.0114*** 2084-0.00944* 2085 2086(0.00990) 2087(0.0101) 2088(0.00364) 2089(0.00509) 2090Defence_ 2091design 2092B*D*sop 20937.86e-05 20947.39e-05 2095-6.45e-05*** 2096-8.02e-05*** 2097 2098(6.90e-05) 2099(6.91e-05) 2100(1.53e-05) 2101(2.06e-05) 2102B*D*length 2103-4.07e-05* 2104-3.83e-05 2105-1.95e-05** 2106-3.75e-05*** 2107 2108(2.34e-05) 2109(2.35e-05) 2110(7.63e-06) 2111(1.01e-05) 2112B*D*(sop*length) 21133.93e-08 21145.95e-08 2115-1.37e-07*** 2116-1.22e-07*** 2117 2118(2.25e-07) 2119(2.26e-07) 2120(2.71e-08) 2121(3.19e-08) 2122Type of defence (see note 3) 2123B*D*embankment 2124-0.0107 2125-0.00651 2126-0.0120** 2127-0.00155 2128 2129(0.0143) 2130(0.0146) 2131(0.00567) 2132(0.00793) 2133B*D*bridgeabt 2134- 2135- 2136-0.0524 2137-0.0580 2138 2139 2140 2141(0.0482) 2142(0.0501) 2143B*D*highground 2144-0.0189 2145-0.0184 2146-0.00327 21470.00685 2148 2149(0.0241) 2150(0.0251) 2151(0.0114) 2152(0.0149) 2153B*D*demount 21540.0259 21550.0321 2156-0.0693*** 2157-0.0503* 2158 2159(0.0484) 2160(0.0482) 2161(0.0179) 2162(0.0270) 2163B*D*floodgate 21640.0336 21650.0353 2166-0.0147 21670.0155 2168 2169(0.0739) 2170(0.0741) 2171(0.0137) 2172(0.0218) 2173Flood_ 2174perception 2175B*D*months(sqrt) 4 2176-0.00290*** 2177-0.00322*** 2178-0.00126*** 2179-0.00241*** 2180 2181(0.000900) 2182(0.000914) 2183(0.000411) 2184(0.000608) 2185B*D*duration 21860.000152 21870.000125 21888.52e-05** 21898.98e-05* 2190 2191(9.32e-05) 2192(9.42e-05) 2193(3.33e-05) 2194(5.13e-05) 2195B*D*months(sqrt)4*duration 21961.10e-05 21971.32e-05* 21988.93e-06*** 21991.28e-05*** 2200 2201(6.98e-06) 2202(7.06e-06) 2203(2.77e-06) 2204(4.13e-06) 2205(Continued) 2206 220722082209===== PAGE 54 (score 18, numeric-paren 6, table-words 3, var-words 4) =====22102211 2212532213Table A2.Continued 2214 2215Lyear (s) 2216-0.000177*** 22170.000136* 2218-0.000173*** 22190.000151** 2220 2221 2222(2.90e-05) 2223(7.52e-05) 2224(2.90e-05) 2225(7.53e-05) 2226 2227Year (t) 22280.000234*** 2229-0.000102 22300.000230*** 2231-0.000117 2232 2233 2234(2.90e-05) 2235(7.51e-05) 2236(2.90e-05) 2237(7.51e-05) 2238 2239 2240 2241 2242 2243 2244 2245Observations 22467,073,555 22471,113,592 22487,073,555 22491,113,592 2250 2251Treated Obs. 22521,804 22531,774 225414,574 22557,357 2256 2257County FE 2258YES 2259YES 2260YES 2261YES 2262 2263R-squared 22640.130 22650.125 22660.130 22670.124 2268Notes: Robust standard errors in parentheses. *, ** and *** means rejection of the null hypothesis at the 226910%, 5% and 1% significance level. 22701 Properties located impacted by the construction of a flood defence are identified using the 6-digit 2271postcode area where the defence was constructed. 22722 Properties impacted by the construction of a flood defence are identified using the 5-digit postcode 2273area where the defence was constructed. 22743 Omitted categories are dummy variables for detached property, urban location and fluvial flood risk. 22754 The omitted category is a dummy variable for floodwall. 22765 Square root of the number of months since the previous flood with respect to the second sale. 2277 2278