Homeowner Willingness to Pay for a Pre-flood Agreement for a Post-flood Buyout

Abstract

Homeowner buyout programs promote climate adaptation efforts by removing homes from floodplains. We estimate homeowner willingness to pay (WTP) for a novel agreement in which they precommit to relocating if a flood severely damages their home in exchange for an expedited buyout process. We find nearly all respondents identified positive WTP to enroll in this program, with average WTP about $600. Factors like flood risk and expectation of neighbors’ responses significantly affect WTP. If the pre-flood agreement is available only if the homeowner has flood insurance, only 68% of homeowners were willing to accept the agreement. (JEL Q51, Q54)