Unintended Consequences of “Mandatory” Flood Insurance

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Staff Reports

Unintended Consequences of "Mandatory" Flood Insurance

Number 1012
April 2022 Revised July 2026

JEL classification: G21, G28, Q5, Q54

Authors: Kristian S. Blickle and João A.C. Santos

We show that the National Flood Insurance Program inadvertently concentrated flood risk among households least able to bear it. Using nationwide flood map data, HMDA records, and credit panel data, we show: (i) insurance mandates reduce mortgage lending, particularly for low-income applicants, (ii) these households disproportionately sort into areas immediately adjacent to flood zones, where credit is still available to them but actual flood risk remains, (iii) following disasters, households in these areas experience sharp increases in debt and delinquency rates. Our results show that binary insurance mandates, which are not reflective of true underlying risk, have adverse unintended consequences.

Available only in PDF

Author Disclosure Statement(s)

Kristian S. Blickle
I attest that I have no material or financial interests to declare.

João A. C. Santos
I attest that I have no material or financial interests to declare.

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