[Flooding] A Flood Risk Categorisation System of Housing Properties in New Zealand — a case study of policy impacts from research output
Abstract:
Dr William Cheung and Associate Professor Edward Yiu’s (University of Auckland Business School) research output (Cheung & Yiu, 2022) on the public perception of flood hazards in the New Zealand Housing Markets has made the advocacy for a flood risk categorisation system to enhance the transparency of the risk management on housing properties.
About one year after the release of their paper, after the two unprecedented climate-related disasters, the Auckland Anniversary Weekend floods and Cyclone Gabrielle in 2023, the Cyclone Recovery Minister (2023) of New Zealand Government announced a new categorisation system for properties in areas affected by the severe weather events. The introduction of the categorisation system helps improve the transparency and provide a signalling effect on the insurance policies and the pricing discovery process in the housing markets.
Background — In May 2022, Dr Cheung co-authored a research article with Associate Professor Edward Yiu, entitled “Public perception of flood hazards in the housing market: a revealed preference study of affect heuristics and availability heuristics.” The article examined how property prices in flood-prone areas of Auckland experienced short-lived decreases following severe flooding events. The research revealed that the general public tends to be influenced more by coastal amenities than by the long-term risk of flooding, particularly when the latter is not transparently communicated.
Research Advocacy — One of the pivotal recommendations from the research was the advocacy for a ‘flood risk labelling’ system in property sales information.
They argued that such a system could serve as a ‘nudge,’ guiding potential homebuyers towards making better-informed decisions. The idea drew parallels with the star rating systems employed for food products, suggesting that flood risk should also be communicated in a “clear and easily digestible format.” (Cheung, 2022)
Subsequent Government Actions — One year after the publication of the article, New Zealand was severely hit by two unprecedented climate-related disasters, the Auckland Anniversary Weekend floods and Cyclone Gabrielle in 2023, the Cyclone Recovery Minister (2023) of New Zealand Government announced a new labelling approach for flood risk categorisation of individual properties after the crisis. The system divides properties into three categories: Low Risk, Managed Risk, and High Risk, each accompanied by a set of recommendations for either repairing or adapting the property to mitigate future flood risks. The core idea of the government’s categorisation system aligns closely with their advocacy for a transparent disclosure of flood risk information.
Impact on Public Policy and Awareness — The government’s adaptation of the advocated labelling system demonstrates the potential impact of academic research on public policy. It signifies the government’s recognition of the need for clear, accessible flood risk information, thereby potentially influencing:
· Consumer Behaviour: Making flood risk information readily available can nudge prospective homebuyers towards making informed decisions.
· Real Estate Market and Insurance Policy: Transparency could lead to more stable property prices, rents and insurance premia, reflecting the true cost and risk associated with flood-prone areas.
· Policy Adaptation: The adoption of this labelling system sets a precedent for how academic research can directly influence public policy, particularly in areas requiring immediate attention due to climate change.
Conclusion — The alignment between the research advocacy and the government’s subsequent policy adaptation underscores the relevance and timeliness of research work. It serves as a compelling example of how targeted academic research can impact real-world policy decisions, thereby contributing to broader societal goals like climate resilience and public awareness. Thus, this research impact case study serves not only as a testament to the actionable insights provided by the study but also as an indication of how our business research on natural disaster can effectively contribute to shaping public policy for the greater good.
References:
ICNZ (2023). Disaster Recovery, Te Hokinga ki te Ora i muri i te Aituā. Insurance Council of New Zealand (ICNZ), 1 June. Available at https://www.icnz.org.nz/industry/disaster-recovery/. Retrieved on 5 October 2023.
Cheung, K. S. (2022, May 11). NZ home-buyers’ natural hazard blind spot. Newsroom. Updated May 14, 2022. Accessed October 5, 2023. https://www.newsroom.co.nz/ideasroom/nz-home-buyers-natural-hazard-blind-spot
Cheung, K. S., & Yiu, C. Y. (2022). Public perception of flood hazards in the housing market: A revealed preference study of affect heuristics and availability heuristics. International Journal of Disaster Risk Reduction, 75, 102977. https://doi.org/10.1016/j.ijdrr.2022.102977
