Flood risk management template

Master Programme in Flood Risk Management

Boulder, Colorado, United States

Acapulco, Guerrero, Mexico

Ljubljana, Slovenia

Flood Impacts on Property Values and Proposals of Measures to Enhance Flood Safety Miguel Angel Trejo Rangel MSc Thesis (WSE-FRM.15-13) Student No. 39943 September 2015

Flood Impacts on Property Values and Proposal of Measures to Enhance Flood Safety

Master of Science Thesis by A. Miguel Angel Trejo Rangel

Supervisor Prof. Dr. Mitja Brilly (University of Ljubljana)

Examination committee Prof. Dr. Dimitri Solomatine (UNESCO-IHE), Chairman Dr. Ioana Popescu (UNESCO-IHE)

This research is done for the partial fulfillment of requirements for the Master of Science degree at the UNESCO-IHE Institute for Water Education, Delft, the Netherlands

Ljubljana September 2015

Photos on cover page taken during flooding in Boulder, Colorado, United States in September 2013 (©YouTube); Acapulco, Guerrero, Mexico in September 2013 (©AMQUERETARO); and Ljubljana, Slovenia in September 2010 (©YouTube). ©2015 by Miguel Angel Trejo Rangel. All the rights reserved. No part of this publication or the information contained herein may be reproduced, stored in a retrieval system or recording or otherwise, without the prior permission of the author. Although the author and UNESCO-IHE Institute for Water Education have made every effort to ensure that the information in this thesis was correct at the time of press time, the author and UNESCO-IHE do not assume and hereby disclaim any liability to any party for any loss, damage, or disruption caused by errors or omissions, whether such errors or omissions result from negligence, accident, or any other cause.

To Camila and Dominic.

Flood Impacts on Property Values and Proposals of Measures to Enhance Flood Safety

Abstract According with data base of the Centre for Research on the Epidemiology of Disasters (1900-2011), floods were estimated to be one of the three main natural disasters responsible of loss of life and caused severe damages. This research shows the relations between values of real estate and flood hazard. Data were collected and analyzed for three case studies: Boulder, Colorado, United States; Acapulco, Guerrero, Mexico and Ljubljana Slovenia. Boulder City is located in the eastern part of the Rocky Mountains at an elevation of 1,655 m; its estimate population for 2013 was 103,166, the city has an area of 63.9 Km2 and a population density of 1524 per square kilometer. The city of Acapulco is located in the state of Guerrero, southern part of Mexico by the Pacific Ocean, at almost zero level; there are 789,971 inhabitants, area of 1,725 Km2, and population density of 458 per square kilometer. Ljubljana City, capital of Slovenia is located between Alpine and Balkan mountains at elevation of 300 m and has an area of 163 Km2, 258,873 inhabitants and a population density of 1,678 per square kilometer. All three cities are not so large but they are in very dynamics development in area and number of inhabitants. Case studies differentiate in natural conditions (climate, topography, hydrology, etc.) and socio-economic background and development. In each case study there are areas that were recently flooded with some reaction of real estate market on the event. The climate change and urban development will increase flood hazard that impact on real estate market, one of the major force of urban development. The question in this research is how real estate sector could be involved to derive flood mitigation measures in three case studies. Data about flood plains, cadaster and answers from questionnaires made to real estate owners were proceed and processed. Analysis made common sense and differences that are, however, depends for every case, taking into account that not every city has the same background hence responses are different way which are described and discussed according with the results of this research. Keywords: Flood control, flood hazard, real estate, stakeholders.

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Acknowledgements This thesis research has been a challenge but also a rewarding experience and it has been possible thanks to the support of many people and the collaboration of different institutes that I would like to thank. I sincerely thank my supervisor Dr. Brilly Mitja for his guidance and support in this thesis research. I thank my committee Dr. Dimitri Solomatine and Ioana Popescu. I sincerely thank CONACyT and CONCIYTEY for giving me the scholarship which allowed me to study this master program. I thank TU-Dresden, UNESCO-IHE, UPC and University of Ljubljana for giving me the opportunity of being part of this master degree. I thank the Boulder County Colorado Authorities, ERN Company and the Surveying and Mapping Authority of the Republic of Slovenia for trusting and giving me the data which were fundamental for this thesis research. I thank to the civil organization Civilna iniciativa za poplavno varnost jugozahodnega dela Ljubljane which helped me sending the questionnaires that were made for this research. I thank my dear family for supporting me in any moment even when they were thousands of kilometers away from me. I thank all my Flood Risk Management masters classmates but in especial to Gabriello and Juanita who supported me during these two years and who became to me great friends. I thank to Okan for being my best friend in the master and small but a great guy. I sincerely thank to Klaudija who helped me to carry out this research. Last but not least, I thank Mayra, Nicoletta, Juanaco, Tiaraju, Diego, Sergio and all my friends from Mexico and all around the world for their sincere friendship which was fundamental to conclude this master.

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Table of Contents Abstract .......................................................................................................................... i Acknowledgements ..................................................................................................... iii List of Figures ............................................................................................................. vii List of Tables ................................................................................................................ x List of Symbols and Abbreviations ............................................................................. xi

Chapter 1.

Introduction ....................................................................... 13

1.1 Overview of Natural Disasters due to Floods ................................................. 13 1.2 Research Objectives ....................................................................................... 15 1.2.1 General Objective ....................................................................................... 15 1.2.2 Particular Objectives................................................................................... 15 1.3 Thesis Structure .............................................................................................. 16

Chapter 2.

Literature Review.............................................................. 17

Chapter 3.

Case Studies ....................................................................... 25

3.1 Boulder, Colorado United States of America ................................................. 25 3.1.1 Location ...................................................................................................... 25 3.1.2 Topography and Demography .................................................................... 25 3.1.3 Climate ....................................................................................................... 26 3.1.4 Floods in Boulder, Colorado, United States ............................................... 26 3.2 Acapulco, Guerrero, Mexico .......................................................................... 30 3.2.1 Location ...................................................................................................... 30 3.2.2 Topography and Demography .................................................................... 30 3.2.3 Climate ....................................................................................................... 31 3.2.4 Floods in Acapulco, Guerrero, Mexico ...................................................... 31 3.3 Ljubljana, Slovenia ......................................................................................... 33 3.3.1 Location ...................................................................................................... 33 3.3.2 Topography and Demography .................................................................... 33 3.3.3 Climate ....................................................................................................... 33 3.3.4 Floods in Ljubljana, Slovenia ..................................................................... 34

Chapter 4.

Research Methodology ..................................................... 38

4.1 Research Design ............................................................................................. 38 4.2 Boulder, Colorado, United States of America ................................................ 38 4.2.1 Data Collection ........................................................................................... 38 4.2.2 Data Analysis .............................................................................................. 39 4.2.3 Proposal of Mitigation Measures and the Economic Benefits of Possible Scenarios ................................................................................................................. 39 4.3 Acapulco, Guerrero, Mexico .......................................................................... 40 4.3.1 Data Collection ........................................................................................... 40 4.3.2 Data Analysis .............................................................................................. 41 4.3.3 Proposal of Mitigation Measures and the Economic Benefits of Possible Scenarios ................................................................................................................. 41 4.4 Ljubljana, Slovenia ......................................................................................... 42 4.4.1 Data Collection ........................................................................................... 42 4.4.2 Data Analysis .............................................................................................. 43 4.4.3 Proposal of Mitigation Measures and the Economic Benefits of Possible Scenarios ................................................................................................................. 43 v


Chapter 5.

Results and Discussions .................................................... 45

5.1 Boulder, Colorado United States of America ................................................. 45 5.1.1 Floods and Real Estate ............................................................................... 45 5.1.2 Mitigation Measures ................................................................................... 48 5.1.3 Theoretical Profile of the Positive Economic Impact due to the Implementation of Mitigation Measures in Boulder, Colorado, United States. ..... 50 5.2 Acapulco, Guerrero, Mexico .......................................................................... 52 5.2.1 Floods and Real Estate ............................................................................... 52 5.2.2 Mitigation Measures ................................................................................... 55 5.3 Ljubljana, Slovenia ......................................................................................... 58 5.3.1 Floods and Real Estate ............................................................................... 58 5.3.2 Questionnaire Analysis ............................................................................... 61 5.3.3 Mitigation Measures Required by the Civil Initiative ................................ 64 5.3.4 Mitigation Measures Required by the Respondents of the Questionnaires 65 5.3.5 Theoretical Profiles of the Positive Economic Impact due to the Implementation of Mitigation Measures in Ljubljana, Slovenia. ........................... 70

Chapter 6.

Conclusions and Recommendations ................................ 73

References .................................................................................................. 75 Appendixes ................................................................................................. 80 Appendix 1 ................................................................................................................. 80

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List of Figures Figure 1. Number of Natural Disaster reported 1900-2011 (Centre for Research on the Epidemiology of Disasters, 2015). ................................................................................. 18 Figure 2`. Total damage (Values scaled to 2014 US $) by natural disaster (Centre for Research on the Epidemiology of Disasters, 2015)........................................................ 19 Figure 3. Theoretical effect of a flood event on property values (Lamond & Proverbs, 2006). .............................................................................................................................. 22 Figure 4. Flood effect permanently capitalized into price (Lamond & Proverbs, 2006). ........................................................................................................................................ 23 Figure 5. Flood effect becoming capitalized into price (Lamond & Proverbs, 2006). ... 23 Figure 6. Improvement due to reinstatement after flood (Lamond & Proverbs, 2006). . 24 Figure 7. Topographic Map of the City of Boulder, Colorado (ESRI, 2015). ............... 26 Figure 8. Map of the city of Boulder, Colorado, United States (Google Earth, 2015) and flood extents in September, 2013 obtained from (Boulder County Colorado, 2015). ... 27 Figure 9. Residents reinforcing the dam on Seventh Street on University Hill in Boulder on Sep. 15, 2013 –Left- and man carrying his pregnant sister with the help of his father on Upland Avenue in Boulder on Sep. 13, 2013 –Right- (Daily Camera, 2013). .......... 30 Figure 10. Total population of Acapulco, Guerrero (National Institute of Statistics, Geographic and IT-Mexico, 2010). ................................................................................ 30 Figure 11. Topographic Map of Acapulco Guerrero (Secretaria de Desarrollo Social, 2004). .............................................................................................................................. 31 Figure 12. Map of the city of Acapulco, Guerrero, Mexico (Google Earth, 2015) and flood hazard extent estimate in 2001 for return period of 100 years by the Mexican National Water Commission. ......................................................................................... 32 Figure 13. Flood streets in the City of Acapulco -Left- (Elephant Publishing, 2013) and house swept away by floods in Acapulco, Guerrero (Informador, 2013). ..................... 33 Figure 14. Map of the city of Ljubljana, Slovenia (Google Earth, 2015), flood extents in September 2010, light blue, and flood hazard, lighter blue (Ministry of the Environment and Spatial Planning, Slovenian Environmental Agency, 2015).................................... 35 Figure 15. Resident rides his bike in one of the flooded sreets of the wenster part of Ljubljana -Left- (AFP/GETTY, 2010) and erial photo of the wenstern part of Ljubljana City flooded in 2010 -right- (Vidmar, 2010). ................................................................. 36 Figure 16. Map of the 2013 flood extents and parcels of properties in the City of Boulder, Colorado, United States (By the author). ........................................................ 39 Figure 17. Flood hazard and location points of residential properties classified as asset poverty of the Acapulco City, Guerrero, Mexico (By the author). ................................ 41 Figure 18. 2010 flood extent and location points of residential properties of the Ljubljana City, Slovenia (By the author)........................................................................ 43 Figure 19. Mean values (USD) for the residential properties in Boulder, Colorado, United States from 2009 to 2014.. .................................................................................. 46 Figure 20. Mean property value (USD) for residential properties from 2009 to 2014 taking into account two categories, one which represents the properties inside the floodplain and the another one the properties outside the floodplain, considering as reference area the 2013 flood extents in Boulder, Colorado, United States. .................. 46 Figure 21. Number of contracts from 2009 to 2014 in Boulder, Colorado, United States. ........................................................................................................................................ 47 Figure 22. Bicycle lines and pedestrians implemented in Boulder City, Colorado (USA Today, 2013)................................................................................................................... 48

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Flood Impacts on Property Values and Proposals of Measures to Enhance Flood Safety Figure 23. Design plan for Wonderland Creek Greenways (City of Boulder, 2015). .... 49 Figure 24. Storm-water collector’s scheme (Piedmont Triad Regional Council, North Carolina, Division of Water Quality, 2013). .................................................................. 49 Figure 25. Scheme of the steps which have to be followed for any plan related with water management in the United States. ........................................................................ 50 Figure 26. Hypothetical case for 2014 where the number of contracts does not decrease after 2013 when flooding occurred in Boulder City, Colorado estimated with a polynomial function and a correlation of 0.9207. .......................................................... 51 Figure 27. Actual total value of the total sales and hypothetical value for 2014 where the total value of the sales did not decreases after 2013 when flooding occurred in Boulder City, Colorado estimated with a polynomial function and a correlation of 0.9459 to the data until 2013. ............................................................................................................... 52 Figure 28. Mean property value of five categories of asset poverty in the City of Acapulco, Guerrero, Mexico in 2008. ............................................................................ 53 Figure 29. Asset poverties affected by flood in 2013 in the neighborhood El Marqués – Left- (SinEmbargo, 2013) and people mobilizing through streets in the City of Acapulco, Guerrero –Right- (CNN México, 2013). ........................................................................ 54 Figure 30. Acapulco International Airport (CNN México, 2013). ................................. 54 Figure 31. Flood hazard estimated by the National Water Institute of Mexico in 2001 and flooded areas in 2013 according to the National Atlas of Mexico (By the author). 55 Figure 32. View of the street along the River La Sabana (Google Street View, 2014). 56 Figure 33. Paseo de La Sabana Street (Google Street View, 2014). .............................. 56 Figure 34. Embankments along the River La Sabana (Mejía, 2014). ............................ 57 Figure 35. Flooded area in September 2013 -left- and estimated flood area with embankments along the River La Sabana –right- (Mejía, 2014). ................................... 57 Figure 36. Mean values (EUR) for the residential properties in Ljubljana, Slovenia. ... 59 Figure 37. Mean property value (EUR) for residential properties in the floodplain and outside the floodplain, considering flood extents of the event that occurred in September 2010 in Ljubljana, Slovenia. ........................................................................................... 60 Figure 38. Number of contracts from 2008 to 2014 in Ljubljana, Slovenia, considering flood extents of the event that occurred in September 2010. ......................................... 61 Figure 39. Year when properties were built. .................................................................. 62 Figure 40. On the left the answer to the question: Do you know what a flood hazard map is? And in the right the answer to the question: Is your property located in a flood prone area? ...................................................................................................................... 62 Figure 41. On the left there is the figure of which shows the answer to the question: Has your property been flooded? In the center the answer to the question: Has your property suffered some damage due to flooding and in the right side figure are represented the question: Is your property secured by a package which also covers flood damage? ..... 63 Figure 42. Answers to the question: Have you observed any increase in insurance costs after flood events? .......................................................................................................... 63 Figure 43. Answer to the question: Have you implemented any mitigation measure due to flooding? ..................................................................................................................... 65 Figure 44. Mitigations which are suggested by respondents to mitigate flood risk. ...... 66 Figure 45. Condition of the Canal Mali Graben by summer of 2015 (By the Author). . 66 Figure 46. View of street by Mali Graben Canal (Google Street View, 2014). ............. 67 Figure 47. How many times in 50 years, in your opinion, are floods "acceptable" to occur on residential areas? .............................................................................................. 68 Figure 48. In your opinion, should all the real estate be secured at same level? ............ 68 Figure 49. How many years in advance do you think we should consider when planning flood management in residential areas?.......................................................................... 69 viii

Flood Impacts on Property Values and Proposals of Measures to Enhance Flood Safety Figure 50. Who do you think is responsible for the reduction of flood risk? ................. 69 Figure 51. Provision of Flood Control (Q), a public good (Shaw, 2005, modified by the author)............................................................................................................................. 70 Figure 52. Actual mean property value; estimate values taking into account an increase of 10.6% (mean difference between floodplain and outsidefloodplain values) and estimated values (+8.25%) considering that properties with riverfront would be more expensive than outside the floodplain as it is the case of Boulder, Colorado. ............... 71 Figure 53. Total actual value of the sales (2008-2014) of properties inside the floodplain; then there is theoretical total value of the sales following a polynomial function which is at the same level than the total value of sales outside the floodplain, 10.6% average higher; and theoretical total value if properties would be in the same percentage more expensive (8.25%) as they are in Boulder, Colorado, United States. ............................. 71

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List of Tables Table 1. Summary of flood impact on property values for different case studies (Lamond, et al., 2009). ................................................................................................... 21 Table 2. Classification of the properties analyzed for Acapulco City (ERN). ............... 40

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List of Symbols and Abbreviations CRED Centre for Research on the Epidemiology of Disasters ERN (for its acronym in Spanish) Assessment of Natural and Anthropogenic Risks EU European Union EUR Euros FEMA Federal Emergency Management Agency GDP Gross domestic production INEGI (for its acronym in Spanish) National Institute of Statistics, Geographic and IT IPCC Intergovernmental Panel on Climate Change IRMA Interreg Rhine Meuse Activities best practices NFIP National Flood Insurance Program NFIR National Flood Insurance Reform OECD Organization for Economic Co-operation and Development TIP Transportation Improvement Program UN-ECE United Nations and Economics Commission for Europe US United States AB 1195 California Disclosure Law NOAA National Oceanic and Atmospheric Administration

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Chapter 1.

Introduction

This chapter gives an introduction to this MSc. Thesis. It shows general information about floods and real estate, besides in this chapter is shown the objectives of the research and the structure of this MSc. Thesis.

1.1 Overview of Natural Disasters due to Floods Weather can be deadly and devastating, various terms have been used to describe this type of weather as extreme weather; hazardous weather; high impact weather; the kind of weather that directly, negatively and relatively immediately affect people, their property and structures. Extreme weather impacts can be manifest in terms of natural hazards, particularly, floods, droughts, storm surges, mud and snow slides, movement of the sea and lake ice and ocean waves (Henstra & McBean, 2004). Natural disasters which are severe and extreme weather and climate events occur naturally in all parts of the world, although some regions are more vulnerable to certain hazards than others. Natural hazards become natural disasters when people’s lives and livelihoods are destroyed (World Meteorological Organization, 2015). Nowadays, It is known that the damage caused by natural disasters is increasing around the globe (Henstra & McBean, 2004), and not because of their potentially higher frequency, but the increase vulnerability of society. Greater vulnerability of society is connected with rapid increase in population, settlement of hazardous locations that were empty until only recently, more frequent increases in population density, and a larger share of urban population (Zorn & Komac., 2011). Natural disasters are primarily common in developing countries (Guha-Sapir, et al., 2004), where a large number of deaths is connected especially with poorer preparedness such in the form of inadequate construction legislation, poor infrastructure, and weak institutions; in addition these areas are also characterized by high concentration of population (Zorn & Komac., 2011). The impacts of natural hazards have been increasing in economic terms; the average annual amounts over a 10 year period have increased from US $4 Billion per year in the 1950s, to US $13 Billion per year in 1970s and to US $65 Billion per year in the 1990s. The number of such events has increased from average of 2 per year in the 1950s, to almost 5 per year in the 1970s and to almost 9 per year in 1990s (Munich Re Group , 2002). Intergovernmental Panel on Climate Change IPCC (2001) reported that part of the observed upward trend in historical disaster losses is linked to socioeconomic factors such as population growth, increased wealth, and urbanization in vulnerable areas, and part is linked to climatic factors such as observed changes in precipitation, flooding and drought events. According to The International Disaster Database of the Centre for Research on the Epidemiology of Disasters CRED from 1900 to 2011, floods were estimated to be one of the three main natural disasters responsible of loss of life, which also affected a large number of people and caused severe damages in terms of money along with storms and earthquakes. 13


Floods are one of the most relevant natural hazards which can become in natural disasters and can occur anywhere after heavy rain events. All floodplains are vulnerable and heavy storms can cause flash flooding in any part of the world. Flash floods can also occur after a period of drought when heavy rain falls onto very dry, hard ground that the water cannot penetrate. Floods come in all sorts of forms, from small flash floods to sheets of water covering huge areas of land. They can be triggered by severe thunderstorms, tornadoes, tropical and extra-tropical cyclones (many of which can be exacerbated by the El Niño phenomenon), monsoons, ice jams or melting snow. In coastal areas, storm surge caused by tropical cyclones, tsunamis, or rivers swollen by exceptionally high tides can cause flooding. Dikes can flood when the rivers feeding them carry large amounts of snowmelt. Dam breaks or sudden regulatory operations can also cause catastrophic flooding. Floods threaten human life and property worldwide. Some 1.5 billion people were affected by floods in the last decade of the 20thcentury (World Meteorological Organization, 2015). All natural hazards can cause adverse effects which can result in different kind of damages, regarding the floods; damages can be either direct or indirect, and tangible or intangible. Direct damages (tangible) are those where the loss is due to direct contact with flood water, such as damage to buildings and their contents. These are tangible when they can be easily specified in monetary terms. On the other hand there are also indirect damages (also tangible) which are losses that occur due to the interruption of some activity by the flood. These also include the extra costs of emergency and other actions taken to prevent flood damage and other losses. These are tangible when they can be specified in monetary terms. And last but not least there are also intangible damages which are casualties, health effects or damages to ecological goods and to all kind of goods and services which are not traded in a market are far more difficult to assess in monetary terms, which are therefore indicated as “intangibles” (FLOODsite Consortium, 2009). For this research is investigated what are the indirect tangible effects of floods, especially on the real estate market, field which has been studied mostly in developed countries however there are still certain gaps, and it is still not very clear what is the relationship between floods and real estate market and how this sector could be involved to propose flood mitigation measures. Previous investigations have shown that floods have an effect on real estate values; however it depends for every case, elements as disclosure of flood plains information, previous experiences, real estate market development that provides data and information, and resilience capacity of the cities contribute to determinate what the effects on real estate are and which mitigation measures are suitable for every case study taking into account that not every city has the same background hence it responses in different way. For instance, Eves (2002) found out that flood-liable property has less value compared with similar one which is not flood-liable. However this difference in prices between flood-liable properties and flood-free properties tends to reduce when there are not floods during certain period of time. Besides, it has been also shown that when there is available information or an act is implemented about flood plain, it can affect property values, Harrison, et al. (2001) made a research in United States on the impact of flood status and they found that since the National Flood Insurance Reform Act NFIR was applied in 1994, there is an increasing importance of the flood zone location. In the market there is a value discount that is applied to property 14

Flood Impacts on Property Values and Proposals of Measures to Enhance Flood Safety transactions in flood-liable areas; however this discount is less than the net present value of flood insurance premium. It means property values are lower but not low enough to cover insurance premiums. In terms of space there can be also an influence when information is disclosed or when an actual flood event occurs, but it does not always occur. As it was mention before disclosure of flood-liability can lead to different trends of residential property values between floodliable properties and the ones non-flood-liable. However, according with Yeo (2003) floods events can have an impact in all the property values of whole the communities, even in those areas which are not flood-liable. This research looks at floods as natural hazard, looking for finding the relationship with real estate, and how this sector could be involved to enhance flood safety in three case studies: Boulder, Colorado, United States; Acapulco, Guerrero, Mexico and Ljubljana Slovenia. The relationship between floods and real estate can differ from one place to another place that is why this research is taking into account three different case studies which have different backgrounds in terms of laws and mitigation measures; however all these three cases are at certain flood risk which according to the Risk Management Training Handbook (United Nations, Educational, Science and Cultural Organization , 2010), it can be understood as the expression of the likelihood and impact of an uncertain, sudden and extreme event that, if it occurs, has may impact positively (opportunity) or negatively (threat). Therefore, this research is looking for generating flood risk management tools to enhance flood safety in communities by means of making them more resilient against floods mostly involving real estate sector, reason why is important to include stakeholders participation at all the levels, where civil organization’s participation is fundamental to make a successful flood risk management; and that is why the main target group for this research are property owners, institutions and/or authorities responsible of guaranteeing safety in flood liable areas, which have to be involved in the decision-making process.

1.2 Research Objectives 1.2.1 General Objective 

Identify what the relationship between flood and real estate is.

1.2.2 Particular Objectives 

Identify exposition to flood hazard on real estate values.

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Find how real estate evaluation could help to implement flood mitigation measures and the benefits of this.

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Figure out how real estate owners as stakeholder can be involved to make to decision making process.

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Analyze how driver is real estate value in flood mitigation process.

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1.3 Thesis Structure The chapter one of this thesis research presents an introduction, an overview of natural disasters due to floods, and the main and particular objectives of this research as well. Chapter two shows some literature review that shows a background of the relationship between floods and real estate sector. In the chapter, there are presented the three case studies. The chapter four shows in detail the methodology which was followed in this research; chapter five presents the results of the analysis that were made and also the discussion and chapter number six shows the conclusions and recommendations. Finally there is a section where is shown the references of this research and one appendix.

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Chapter 2.

Literature Review

This chapter presents more in detail a literature review regarding the issue which is addressed in this research in order to understand better the importance of the investigated topic. Flooding is an increasing phenomenon worldwide which has been attributed to climate change, global warming and the melting of the polar ice caps although experts disagree on the extent and speed of this change (Evans, et al., 2008). The increasing urbanization of the world means that the activities of mankind have increased the amount of properties at risk of flooding weather (Clark, et al., 2002). Properties continue to be built on flood plain and there is some evidence that the actions of governments in building flood defenses has increased the tendency for floodplain development (Boase, 2005). Some important considerations in the United Nations and Economics Commission for Europe UN-ECE Guidelines on Sustainable flood prevention (2000) make mention that natural hazards and flood events are part of nature, they have always existed and will continue to exist with the exception of some floods generated by human interventions. However, society has become more vulnerable to natural hazards due to human interventions such alterations in drainage systems, urban development, deforestation and some other practices near by the river basins which make a chance in the natural situation of the flow. Average global temperatures have increased by 0.7°C over the past century and are now rising by 0.2°C a decade (Metz, et al., 2007), it further noted that only 5°C was the average change in global temperatures required to move the Earth from ice age to the climate of the 20th century, and due to this assumption the sea level is expected to rise and precipitation patterns are tending to change to become more extreme. On the other hand, according with the Interreg Rhine Meuse Activities best practices IRMA (2003) in UN-ECE (2004), probability of flooding can increase drastically and the impact of floods in terms of human health economic losses can rise hence protection against this kind of events cannot be constrained to only particular assets since more communities could be affected even when they seem safe so far. Protection does not ensure that damages cannot occur since nature still very unpredictable; however societies should ask themselves what price they are willing to pay to mitigate risks and how well prepared they wish to be, taking into account the possible negative effects there can be downstream and/or upstream. Floods are one of the most often natural disasters which are becoming more frequent in the last years according to what is registered in the International Database of the CRED, and associated to floods it can be found storms which are also one of the most frequent disaster that several times results in floods, followed by epidemics as it is shown clearly in the Figure 1, however one of the main questions is that, do people are aware about this natural disasters, are they being involved to make decisions regarding these issues, if not how it could be change in a successfully way. Zorn and Koman (2011) have reported a large number of deaths are connected especially with poor preparedness of different sectors, from institutional levels to civil levels due to the inadequate or even non-existent mitigation measures to enhance flood safety in several communities worldwide. 17


Figure 1. Number of Natural Disaster reported 1900-2011 (Centre for Research on the Epidemiology of Disasters, 2015).

The three natural disasters which have caused more economic damages along history are earthquakes, floods and storms. As it can be seen in Figure 2 there is an increased in the last years being earthquakes the natural disaster which causes more economic damages especially in 2011 when there is the highest peak and when actually a massive earthquake took place in Japan, followed by storms which have the maximum peak of economic damages in 2005, year when hurricane Katrina hit the states of Florida and Louisiana in United States, which also caused severe floods in those states, and the followed natural disaster, that also results in important economic damages, is floods, having a maximum peak in 2011 when massive floods impacted Queensland, Australia. What would be also important to know is how these natural disasters have impacted property values, if so for how long this impact lasted, since as human communities we are very complex to determinate what makes us change our behavior with regarding to natural phenomena.

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Figure 2`. Total damage (Values scaled to 2014 US $) by natural disaster (Centre for Research on the Epidemiology of Disasters, 2015).

In the basic principles and approaches of the Best practices on flood prevention, protection and mitigation document (2004) which is an update of the EU-ECE Guidelines (2000), is stipulated that natural hazards require a change of paradigm, instead of defensive actions against hazards to management of the risk and living with floods. Human activities should be adapted to the existing hazards and appropriate mitigation and non-structural measures need to be taken due to the better potential efficiency and sustainable solutions with the main objective of reducing human beings and goods exposed to flood risk. However, structural measures are still very important to protect human health and safety since most of the population remains in urban areas where several times rivers overflow or intense rains can result in floods combined with many other conditions related to the different areas. The document of the Best practices on flood prevention, protection and mitigation highlights that awareness, preparedness and participation are important to make an appropriate flood risk management. Regarding to awareness, people have to be aware that they are at some kind of risk, it usually happens when people have experimented specific event effects which left an experience, however awareness could be also improve by informing people of the risk they are at by means of different resources which can give them useful knowledge. Then preparedness comes out when individuals recognize that they are at some specific risk because it allows them to be ready for future events and make possible planning strategies, which allow people to be safer. And these two aspects have to be related with participation which is relevant to make any decision regarding the flood risk management. Well-structure emergency organization is vital in order to be able to cope with flood emergencies as it is mentioned in the document of the Best practices on flood prevention, protection and mitigation, taking into account that some actions such evacuation and rescue services can help to mitigate causalities. Reducing of flood potential damage is a concern which has to be attended by public and authorities. Information policy has to be developed

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Flood Impacts on Property Values and Proposals of Measures to Enhance Flood Safety by authorities and they should create participation channels to make decisions involving public participation. Public should be informed about the flood risk they are at and encouraged to take measures. It is anyone’s responsibility who lives and works by or on some flood potential area, to adapt to mitigate flood risk, however floods are not very often recognized and there is not a clear understanding. One fact that is remarkable is that all measures linked to public information and awareness raising are most effective when they involve participation at all levels. UN-ECE Guidelines on Sustainable flood prevention (2002) in UN-ECE Guidelines (2004) remarks that public participation should be ensure by authorities which can give information about flood mitigation by means of accessible resources like flood hazard maps, information based on Geographic Information Systems and education which has to be disseminated early and constantly. Public should have the knowledge about what activities are suitable in the area at risk of flooding to reduce potential damage. Besides, information about special measures which could be taken and restrictions on construction should be available and easily to be understood. The public should be encouraged to take their own flood prevention measures and how to act before, during and after flood events. In addition insurance can also help to increase the awareness and to reduce the financial risk for individuals, enterprises and even whole societies where natural hazards are concerned. Insurance companies tend to raise the willingness of home business owners to defend their property against risks. The main objective of the insurance should be to reduce the vulnerability of exposed areas by taking efficient mitigation measures. Nowadays, there are already some insurance programs as the National Flood Insurance Program NFIP implemented in 1968 by the Federal Emergency Management Agency FEMA of the United States, which was established to identify flood-prone areas and provide subsidized flood insurance to reduce flood risk; nonetheless, it is not the case for everywhere. Real estate market sector responses differently and is influenced by many elements; hence it is important to get knowledge about the background of floods in each case study to know how these kinds of events are perceived by the local communities, mainly landlords and what can be done. It is also outstanding to mention that perception of floods can differ, for instance they can be done either with myopic or amnestic perspective, the first one is related with discounting information from anticipated future events, with the discount rising progressively as the event becomes less imminent and amnestic referring to amnesia means discounting information from past events, with the discount rising progressively as the time elapses (Pryce, 2011). Due to the different aspects just mentioned, results of investigations vary widely, Yeo (2003) reported that flood events can affect directly residential property values, for instance average values in Oak Grove fell by 19-26% (Muckleston, 1981; Muckleston, 1983), 30% at Wilkes/Barre (Montz, 1990; Tobin & Montz, 1994), 19% at Linda/Olivehurts (Montz & Tobin, 1988; Tobin & Motz, 1988; Tobin & Montz, 1994; Tobin & Motz, 1997), 9% at Te Aroha (Montz, 1992a; Montz, 1992b; Montz, 1993) and 60% at Nyngan. A slight decrease was observed for Sydney’s George River district after the 1986 flood (Property Research Centre, 1992; Lambley & Cordery, 1991; Lambley & Cordery, 1997). On the other hand there are also some cases which showed that flood events did not have negative impact on property values. Some of these cases are mentioned on Yeo (2003): 20

Flood Impacts on Property Values and Proposals of Measures to Enhance Flood Safety floods in 1986 at Des Plains, Illinois, USA; Cambridge, Ontario, Canada in 1974; and Paeroa and Thames, Coromandel, New Zealand in 1981, where prices actually increased. Some cases where prices did not change after flood events like Sydney’s Georges River district in 1988. And finally some other examples like Houston, Texas, where flooding in 1979 had no direct impact on property values, however when flood insurance rates increased property values decreased. The following Table 1 shows the floodplain effect on residential property values for different case studies, and it can be seen that values are not similar ones from others, for some case studies there were even some positive effects, others presented no effects and on the other hand there were some extreme negative effects that peaked up to 60% discount over the property price before the flood event, being 15.9% the average floodplain effect, when only the cases where there were negative effects were taking into account. Table 1. Summary of flood impact on property values for different case studies (Lamond, et al., 2009). Year Author Case Study Floodplain effect 2004

Try and Romm

California, USA

-4.20%

2003

Bin and Polasky

Pitt County, North Carolina, USA

-8.30%

2001

Harrison, et al.

Alachua County, Florida, USA

-3.70%

2001

Shultz and Fridgen

Fargo/Moorhead/North Dakota/Minnesota, USA

-2.90%

1994

Tobin and Montz

Des Plaines, Illinois, USA

1994

Tobin and Montz

Linda/Olivehurst, California, USA

No effect

1994

Tobin and Montz

Wilkes-Barre, Pennsylvania, USA

-30%

1991

Speyrer and Ragas

New Orleans, USA

1990

PRC

Nyngan, NSW, Australia

1990

Bialaszewski and Newsome

Homeworld Alabama, USA

-6.30%

1989

Shilling, et al.

Baton Rouge, Louisiana, USA

-4.20%

1989

Donnelly

La Crosse, Wisconsin, USA

1987

Skantz and Strickland

Houston, Texas, USA

1987

Macdonald et al

Monroe, Louisiana, USA

1986

Montz & Tobin

Linda/Olivehurst, California, USA

-19%

1985

Montz

Te Aroha, Coromandel, New Zeeland

-9%

1979

Zimmerman

New Jersey, USA

1976

Shabman and Damianos

Alexandria, Virginia, USA

-22%

1972

Montz & Tobin

Wilkes-Barre, Pennsylvania, USA

-30%

1964

Muckleston, et al.

Oak Grove, Oregon, USA

-26%

-9%

Positive effect -60%

-12% No effect -8.50%

No effect

Another aspect which also related to flood effects on values properties is flood disclosure. Troy and Romm (2004) made an analysis to estimate the effects of flood hazard disclosure under the 1998 California Hazard Disclosure Law (AB 1195) on property values throughout California, and they found that after AB 1195, the average of floodplain home sold for 4.3% less than a comparable non-floodplain home. He also reported that there was a difference between neighborhoods with larger proportion of Hispanic population than others with less. Price reduction on properties varied more in neighborhoods with larger Hispanic populations. Results suggested that, in particular, homebuyers in Hispanic communities are better disclosure under AB 1195 than they were under NFIP in 1994 (Troy & Romm, 2004).

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Flood Impacts on Property Values and Proposals of Measures to Enhance Flood Safety As it is mentioned before the relationship between floods and real estate market sector can differ from place to place due to different characteristics of the communities and this is why different case studies are taken into account for this research. Besides the information given above, there are also some theoretical profiles of flood impact on property values which are presented by some authors. For instance Tobin and Montz (1994) reported that speed and scale of recovery in value vary with time, severity and frequency of flood events, and the scenarios can be characterized as it is show bellow with four basic profiles. The following Figure 3 shows the theoretical effect of a flood event on house properties, when one flood affects temporally property values, however after some time the price recovers (ignoring inflation), the conditions which may be to get this profile are: flash floods in a low risk area, since the probability of having future floods is very low and prices would recover very quickly after people forget about past events. Probably it is the most common case for areas at flood risk, especially where mitigation measures are not taken and people do not realize that floods can occur over and over but likely not very regularly.

Figure 3. Theoretical effect of a flood event on property values (Lamond & Proverbs, 2006).

The following Figure 4 shows when floods are already capitalized into house properties, it means that after a flood event the property values are the same than they were before the flood event, this can be leaded due to regulated disclosure and/or mandatory insurance. However it can be disturbed by the duration of the flood event and its impact, this kind of profile is related to properties which are almost at no risk due to their preparedness to flood events. It would happen right after some time that a proper flood risk management is made. When it is said that a proper flood mitigation management is made, it means that three main sectors can be taken into account, social-environmental-economical, having in mind the holistic approach for a flood risk management.

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Figure 4. Flood effect permanently capitalized into price (Lamond & Proverbs, 2006).

The next theoretical profile (Figure 5) shows how new information of flood events can lead to permanent changes in expectations of property owners, especially when financing issues are taken and there are no benefits at all regarding to enhance flood safety and real estate market.

Figure 5. Flood effect becoming capitalized into price (Lamond & Proverbs, 2006).

The last theoretical profile (Figure 6) shows when improvements to enhance flood safety, in properties and flood-prone areas, have been taken and proved immediately after a flood event has occurred, it means that properties which were inside flood-prone areas change to non-flood-prone areas due to the taken betterments and/or measures mitigate the impact of floods therefore the risk is lowered and besides property value can even increase. It would be the most beneficial situation to property owners and what this research looks for, by means of integrating a holistic approach for flood mitigation management.

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Figure 6. Improvement due to reinstatement after flood (Lamond & Proverbs, 2006).

The impact of floods result in the necessity of taking into account the temporal variable for the real estate market and its relationship with flood events, considering local contexts of each case study. As it is shown the previous profiles, floods could have an impact on property values in different ways, however it is also important to understand that residential properties in economics are private properties, at least for the case studies which are analyzed in this research, and on the other hand, if mitigation measures are considered as public goods and for developing any urban area, it depends on who owns the property rights, and what are the roles of property owners and in economics there are three types of properties:   

Public goods: non-excludable, non-rival consumption Common properties: non-excludable, rival consumption Private goods: excludable, rival consumption

The market-based resource allocation mechanism works best when the goods and services are traded as private in nature because sellers can control their distribution and deny access to them unless the price demanded is paid, and that is why economists call private goods “excludable” and “rival” which is the opposite to public goods Agthe, Billings and Ince (2000) suggested that flood control is an impure public good or less pure as Rogers, et al. (2008) mentioned, which basically means that (i) no one can exclude from the consumption of public goods, and (ii) there is not rivalry in the consumption of public goods, reason why flood control is a public good because everybody between the area benefits and also it appears that there is no rival consumption, however flood control could be excludable by constructing mitigation measures like embankments which can exclude some areas of the benefits of this measures. In such cases free riders get flood protection at the producer’s desire level of flood control. Hence, since flood control is considered as public good, it may be difficult to rely on market to pay its cost, and that is why some governments like the one from United States usually pays for covering this expense. However, for this research one of the objectives is to show how real estate could help to implement mitigation measures and what would be the benefits.

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Chapter 3.

Case Studies

In this chapter the three case studies which were chosen are described, furthermore a background about floods in the case studies is given to highlight the importance of addressing this research to these specific cases. Flood events have impacted several communities along history, however how every country proceed depends of many factors and also the availability of resources to implement either structural or non-structural mitigation measures. This research has as case studies three cities which have been impacted by floods and one event in specific has been chosen for every case to identify how it could affected the area taking into account that the background for each case is different, however in any case is important to stand out the importance of stakeholder, specifically property owners which can be suffer any kind of damage in their properties. The data for each case study is similar, however it is clear that there are some countries where measures have been more developed and where there is a higher control of real estate sales, this is the case of United States of America where real estate data are available in detail and where the market is very dynamic, on the other hand there is Mexico where there is not a very open access to date about real estate and flood hazards, and last but not least there is Slovenia, which relatively a small country with less sales annually. These three countries have been selected taking into account that they are at the flood risk and have suffered at least one important event in the last years which has been very sever and there have even been some causalities. The three case studies are one from each country just mentioned above and availability of data depended of how accessible data were to research purposes and public communication.

3.1 Boulder, Colorado United States of America 3.1.1 Location Boulder City is located in the eastern part of the Rocky Mountains, in the county of Boulder, Colorado State, United States of America, 40°01′39″N, 105°15′07″W.

3.1.2 Topography and Demography The city is at an elevation of 1,655 m; its estimate population for 2013 was 103,166, the city has an area of 63.9 Km2 and a population density of 1524 per square kilometer (United States Census Bureau, 2013). The following map shows the topography characteristics of the city of Boulder Colorado, and it can be seen that in the Western part of the city are there the Rocky Mountains which reach an elevation up to 4,401 m and in the Easter part of these mountains there is the city which is located over a considerable flatter area, fact that influences the occurrence of flood events in the area.

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Figure 7. Topographic Map of the City of Boulder, Colorado (ESRI, 2015).

3.1.3 Climate The city of Boulder is characterized for having moderate temperatures and an average of 300 sunny days a year. This city is considered as a high-desert due to the altitude of around 1500 m above the sea level, and due to this elevation there is a mild climate little humidity and in summer and winter months. The warmest month is July with an average daytime temperature of 30.5°C and an average nighttime temperature which can drop until 5°C. January is the coldest month, with an average daytime high to 7°C (Boulder Conventions and Visitors Bureau, 2015).

3.1.4 Floods in Boulder, Colorado, United States Through Boulder City there is the Boulder Creek (50 Km length) and its mains tributaries which are dry ten months a year, however this zone is the number one in flash floods in Colorado. Since 1859 inhabitants of Boulder City began making some changes in the Creek watershed by building dike, reservoirs, pipes and other modifications to benefit local productive activities developed in the city, getting as a result changes in the dynamics of the natural system. The following Figure 8 shows the picture of the city of Boulder Colorado and also the flood extents of 2013 which were estimate as a flood event of 100 years return period made by Boulder County Colorado; these flood extents represent an actual event and this is the main reason why this event was chosen furthermore that there was available information, hence 26

Flood Impacts on Property Values and Proposals of Measures to Enhance Flood Safety this research can describe more realistic what the actual impact of flood events on property values is, and also allows to estimate if there was such an impact and if so, how it was.

Figure 8. Map of the city of Boulder, Colorado, United States (Google Earth, 2015) and flood extents in September, 2013 obtained from (Boulder County Colorado, 2015).

A description made by Phyllis Smith (1987) about Boulder area says that creeks are fed by snow coming to the foothills along Colorado’s Front Range, in the eastern side of the central Rockies, melted snow is carried with debris become a danger for properties downstream. Besides during the season from May to September there are intense rainfalls due to warm air masses coming from the Gulf of Mexico, these rainfalls fill the creeks very quickly and change drastically their character. After recurrent events during this season the creeks can turn into powerful flows which can carry any object that is on the way and floodplain. For United States, floods represent one of the most relevant natural disasters; around 7% of the American territory is flood plain. In the specific case of Boulder city, the first community settled came for gold nuggets which become an instant wealth, they did not pretend to stay but in the end Boulder City took place. Since the first years Boulder community was known for arguing to almost any proposal, however water was not very relevant at that moment and quality was poor until the system was improved at the end of the century and many of the lots along Boulder Creek increased their price hence no one would be able to buy them. The first streetcars were built however they did not work since no one would pay the fee. Boulder Creek has its sources in Boulder canyon 35.4 km from the community, its channel average is around 1.5 m in depth and 14 m in width at the bottom of the bed and 27.5 m in width at the top. 20 km upstream from the mouth of the canyon, Baker Dam and Reservoir were built in 1908 and were in full operation by 1910. 27


The drainage of Boulder and its tributaries covers 1,100 km2 of which are upstream in the mountains above Boulder and 354 km2 of which are downstream trough the city (Smith, 1987). Boulder Creek and its tributaries are drainages along the Front Range with a potential for flood hazard. The men learned since October 1858, when they settled the first gold seeking camp, about the possibility of flooding along local mountain streams from an Indian’s dream. It is known that the first flood registered in the area occurred in the South Platte River basin which had also an impact in Boulder Creek area occurred in 1844 however it was reported until 1864, same year when three floods occurred during May and June in Cherry Creek area near young Denver, later-on more floods occurred in May of 1967, 1876 and 1885 with a relatively minor damage in the community of Boulder. Afterwards, almost 10 years later when another flood occurred in 1894, due to a dense winter and heavy rainfall for 6 hours in late May when Boulder Creek began flooding and the community of Boulder was cut off from the world for five days, this flood caused several damages in public buildings, houses, roads and bridges. 1894 flood was referred as a 95 or 100 return period event. The last years of nineteenth century, Boulder citizens started to be concerned about flooding along Boulder Creek, but it was not until 1904 when attitude had a real change towards flood control when two persons died and properties were damaged due to floods. Then another tragedy occurred in 1909 when other two people died and The Camera suggested that the Council would have to take actions. By 1910, Baker Dam, which was built in the mountains, was completed and Boulder citizens felt safe believing that another flood would be remote. By 1912, the firm Metcalf and Eddy was hired by Boulder City to make improvements in Boulder Creek and the sewerage system, the firm suggested making wider and deeper the channel however seemed that there was not enough budget to complete the project and improvements were not done. Several flood occurred during following years (1914, 1919 & 1921), and in 1928 came out the first national interest in funding flood control projects which was codified in the flood control act. US congress had vested the responsibility for flood control to the Army Corps of Engineers, however not so much was done regarding to floods. By 1944 S. R. DeBoer submitted his recommendations taking into account that there was available money from the federal level and it would be inexpensive for local authorities, the report was improved with more recommendations of the Corps, basically suggested a reservoir to catch a portion of the debris which could come downstream when flooding occurs since they could affected the bridges because they were very low. After the report was finished they concluded that nearly all the business center, schools, yards, residences, paved and unpaved streets, several public facilities and irrigation structures were in the flood plain, hence The Corps of Engineers gave specific recommendations which were not taking into account even when additional federal money was available by 1950. By 1958 Gilbert F. White and some of his colleges published an study based in cities developed in flood plains, being Boulder one of these and they noticed that the population growth 78% from 1930 1950 and there was a high percentage of occupancy in the flood plain by new constructions, inhabitants had never heard about the big flood in 1894, so they were not very aware about the risk they had (Smith, 1987).

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Flood Impacts on Property Values and Proposals of Measures to Enhance Flood Safety In 1965 a big flood hit Denver and surrounding area, there was a loss of 2,500 homes and 750 businesses; it made Boulder inhabitants to think more about being concerned of flood measures and the flood control group was growing, however it did not last too long since in 1966 the council voted down the zoning ordinance of the flood control regulations. Gilbert White was hired to study land use regulation and flood hazard who said the hazards had increased because development in the mountain areas and construction of Baker Reservoir. It was until 1969 when the council moved into action and some flood regulations were taken, flood storages and floodways were defined, any area which could be flood by two or more feet of water had to adopt flood/proofing requirements, however it was until 1975 when flood plains were adopted officially. In 1971 council made a review of the flood map and in the same year, a radar system was implemented in Limon, Colorado which allowed getting more accurate weather information. In late July 1976 another big flood took place just 35 miles away from Boulder, centered over The Big Thompson drainage just in the Northeast of Boulder, the toll of this event was 138 people and US $35 million. Same year when Viele Channel was re-constructed and some areas were removed from the flood plain, a year later the Corps the predicted peak discharge from 7,400ft3/s to 12,000ft3/s (209.5 m3/s to 339.8m3/s). In 1984 MSM/Greiner was hired to prepare the first detailed map on tributaries and by the end of the 1980s Boulder Creek was one of the most documented in the United States. Daily Camera warned that Boulder was the highest risk city in Colorado and citizens complained, however council in charge managed to change the attention to non-structural solutions. In early 1980s a warning system was implemented, the number of business in the flood plain which purchased emergency alert radio devices increased and flood-proofing improvements buildings as well. In 1986 a detailed session was made regarding the land use and mitigation measures for Boulder Creek tributaries; however results were taking into account until the following year when there were more strict building requirements for mobile homes and other constructions. Lately, one of the most recent floods occurred in Boulder City in September, 2013, when heavy rainfall due to an unusual combination of deep, moist and a stationary weather pattern; low-pressure system and a plume of monsoonal tropical moisture from the Pacific ocean off western Mexico and due to the circulation of the event more moisture was available from the Gulf of Mexico. Most of the rain of this event fell from September 11th until September 13th; however the event lasted from September 9th to 15th. It was reported by National Oceanic and Atmospheric Administration (NOAA) Atlas 14 that was a “1000-year rainfall” and a “100-year flood” for the Boulder area. The toll of the flood in 2013 was: US $2 million damage, 8 deaths, 345 homes were destroyed, 557 homes were damaged, and also 33 commercial properties were damaged and 3 were destroyed (The Boulder Office of Emergency Management, 2013).

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Figure 9. Residents reinforcing the dam on Seventh Street on University Hill in Boulder on Sep. 15, 2013 –Left- and man carrying his pregnant sister with the help of his father on Upland Avenue in Boulder on Sep. 13, 2013 –Right- (Daily Camera, 2013).

For the case study of Boulder the flood event which occurred in 2013 was the one analyzed in this research, specifically the impact on flood property values of the area, considering that it has been one of the most largest natural disaster occurred lately in the United States, furthermore United States is one of the countries which has developed more mitigation measures regarding flood protection and country which has a dynamic real estate market along history.

3.2 Acapulco, Guerrero, Mexico 3.2.1 Location The city of Acapulco is the second case study of this research which is located in the state of Guerrero, southern part of Mexico and in the North-eastern part of the Pacific Ocean, 16°51′49″N, and 99° 52′57″W.

3.2.2 Topography and Demography This city is by the sea level, where there are 789,971 inhabitants which is actually almost 15% larger than in 1995 (Figure 10); the city has an area of 1,725 Km2, and population density of 458 per square kilometer (National Institute of Statistics, Geographic and IT-Mexico, 2010).

Figure 10. Total population of Acapulco, Guerrero (National Institute of Statistics, Geographic and ITMexico, 2010).

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The following map shows the topography characteristic of the city of Acapulco and the urban area (amber) by 2003 which was analyzed in this research. The city of Acapulco is located in the flatter part by the Pacific Ocean where is found the Bay of Acapulco, which is the central square of the map, in the figure also is possible to see that the bay is surrounded by mountains which reach up to around 350 meters above the sea level.

Figure 11. Topographic Map of Acapulco Guerrero (Secretaria de Desarrollo Social, 2004).

3.2.3 Climate The city of Acapulco has a warms humid weather with an annual mean temperature of 25°C, average minimum of 18°C and maximum of 35°C. The rainfall season is mostly during summer (from June to September), and a mean annual precipitation of 1200 mm (National Institute of Statistics, Geographic and IT-Mexico, 2010).

3.2.4 Floods in Acapulco, Guerrero, Mexico One of the main hydrographical resources source is La Sabana River which crosses the municipality of Acapulco from north to west passing by rural and urban areas. In 1995 according to the National Institute of Statistics, Geographic and IT (known in Spanish as INEGI), beside the river there were 33 settlements of which 81.8% were rural and 18.2% were urban Since Acapulco city is located in the State of Guerrero, which is by the Pacific Ocean, it is exposed to tropical cyclones that can result in heavy precipitations. Espinosa (1997) reported that for northwestern part of the Pacific Ocean there was an average of 16 cyclones every year for the period of 1968-1996, maximum number of annual cyclones was 24 and

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Flood Impacts on Property Values and Proposals of Measures to Enhance Flood Safety minimum 6. The cyclone season is usually from May to November, with more intensity in August. Very often this kind of meteorological events causes floods which unfortunately result in loss of life and socio-economic impacts. Figure 12 shows the map of Acapulco, in this figure can be seen that the city is located by the seaside, hence it is exposed to several natural phenomena as it was already mentioned, the figure bellow also shows the flood hazard extents estimated by the Mexican National Water Commission in 2001, nonetheless, this research was actually attempting to use flood extents of actual events, floods which occurred in September 2013, however it was not recommended to use data of that event since those extents did not characterize accurately the actual flooded areas, fact which was proved by pictures from different sources that are shown in the results chapter where this fact is discussed. The file which supposedly shows the flood extents of the event occurred in September 2013 is available in the National Atlas of Mexico’s website, but again it is important to highlight that information is not representative of the occurred event in 2013 and it can be due to the methodology that was used by the National Center of Disasters Prevention of Mexico which is responsible of the information available in the National Atlas of Mexico’s website.

Figure 12. Map of the city of Acapulco, Guerrero, Mexico (Google Earth, 2015) and flood hazard extent estimate in 2001 for return period of 100 years by the Mexican National Water Commission.

The reason why flooding impacts in September 2013 wanted to be analyzed is because this event was one of the most severe natural disasters that has occurred in Mexico, which took place in several coastal states of Mexico and one of the most affected States was Guerrero where Acapulco City is located; this event hit the country between September 12th and 20th, 2013; it was actually the combination of several conditions: heavy precipitations due to two hurricanes which occurred almost simultaneously; on one side Ingrid, hurricane coming from the Gulf of Mexico, and on the other side, hurricane Manuel formed in the Pacific 32

Flood Impacts on Property Values and Proposals of Measures to Enhance Flood Safety Ocean, phenomena which is really rare to occur, plus moist southwesterly flow which resulted in very severe precipitations mostly on the mountain coastal areas, causing the floods in many residential areas due to the overflow in the river La Sabana and La Laguna Negra. The combination of these two hurricanes, which brought heavy precipitations, reached a peak storm of 1,100mm which was measured in San Isidro, Guerrero followed by one location nearby Acapulco, where the recorded precipitation was 450mm.

Figure 13. Flood streets in the City of Acapulco -Left- (Elephant Publishing, 2013) and house swept away by floods in Acapulco, Guerrero (Informador, 2013).

According to a report from the Meteorological Service of Mexico and the Mexican Civil Protection Agency, 123 deaths in Mexico was the toll of this event, of which 97 occurred in the State of Guerrero, where at least 11,000 houses were destroyed by the floods and landslides, around 20,000 people were evacuated and the overall economic impact estimated by Aon Benefield (2013) exceeded US $4.2 billion.

3.3 Ljubljana, Slovenia 3.3.1 Location Ljubljana is the capital and largest city of the Slovenia, 46°03′20″N, 14°30′30″E, which is located in a valley between the northern region of the Adriatic Sea and Danube region. The development of the city core of Ljubljana and the Ljubljanica River management dates back to the time of ancient Greece and Rome with the building of Emona, the position of the city was harmonized with the position and water regime of the then watercourses of the Ljubljanica and Gradaščica that were equipped with structures for navigation and bridges (Brilly, et al., 2003).

3.3.2 Topography and Demography The city has an area of 163 Km2, and it has an altitude of 296 m above the mean sea level, there are 258,873 inhabitants and a population density of 1,678 per square kilometer (Republic of Slovenia, Statisical Officers, 2014).

3.3.3 Climate The climate is characterized to be between oceanic and humid subtropical due to the proximity to the Adriatic Sea in the southern region and mountain area in the North, with even some continental conditions. The city has warm summers (July to August) with 33

Flood Impacts on Property Values and Proposals of Measures to Enhance Flood Safety temperatures between 25 and 30°C, when thunderstorms are usual and moderately cold winters (December to February), when snow is common, being usually January the coldest month temperatures around 0°C. Winter and spring are relatively drier seasons than summer and autumn; however precipitation is distributed throughout the seasons, with an annual precipitation of 1400 mm and that is why Ljubljana is known as one the wettest European Capitals (Ministry of the Environment and Spatial Planning , 2009).

3.3.4 Floods in Ljubljana, Slovenia Natural disasters in Slovenia have several impacts to real estate; where the greatest damages are caused by earthquake which is followed by flooding and some other disasters which occur rarely. However, according to Orožen and Hrvatin (2001), data related to damage on public infrastructure is usually available; nonetheless costs on damage to real estate are not very often publicly available. Regarding floods, in the last century they have appeared every year in Slovenia, they can occur any time of the year and are common events with greater frequency in the fall, actually there has not been any decade without major floods and they usually occur across all Slovenia (Polajnar, 2002). Regarding water structures in the city of Ljubljana, the medieval part of the city boasted a characteristic rake placed transversally to the watercourse among the fortified city walls. In addition to the rake, there is a ditch between the castle hill and the Ljubljanica. Ljubljana spread to both river banks, and consequently, the flood plain area was narrowed with houses, fortified banks, mill dams and fortification objects (Uhlir, 1956). The main river through the city is called Ljubljanica with 41 Km in length, it comes from the southern part of the city towards the eastern part where joins with Sava River just a few meters after the tributary Kamnik Bistrica appears coming from the Alps. The specific study area is found in the Southwest part of the City of Ljubljana where the canal Mali Graben passes through; this canal is an artificial mitigation measure of the Gradaščica River, it was dug to mitigate floods on Trnovo district and it is also the largest tributary of Ljubljanica River (Municipality of Brezovica , 2009). The city of Ljubljana is exposed to flood events due to the hydro-geographical diversity in Slovenia which is affected by rainfall and snowfalls. These factors influence the main flood events which usually appear every year mainly during the fall (September). Slovenian landscapes are most affected by flash floods and lowland flooding, whereas floods on some karts poljes constitute another distinct type, these kind of floods are less dangerous because of the slow inflow of water, they are also more frequent and regularly recurring, hence people have adapted to them and have located their settlements, fields and main traffic routes on terrains above their levels (Komac, 2013), which is not the case for flash floods where buildings are constructed in areas most of the time above the water levels but inside floodplains beside streams with a relatively flood hazard not very frequent. Figure 14 shows the map of the city of Ljubljana and the layer of flooding occurred in 2010 (light blue) which was an actual event, however a supervised analysis was done and it was identified that this layer did not cover some areas flooded in 2010 and that why another layer was added (lighter blue) which represents better the flood extents in 2010. Both of these layers were obtained from the data base available on internet of the National Ministry of the Environment and Spatial Analysis, which is in charge of generating this kind of information.

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Figure 14. Map of the city of Ljubljana, Slovenia (Google Earth, 2015), flood extents in September 2010, light blue, and flood hazard, lighter blue (Ministry of the Environment and Spatial Planning, Slovenian Environmental Agency, 2015).

In the past, due to the narrow and shallow Ljubljanica river could not carry the flood water. Major floods were registered in 1190, 1537, and 1599. A first greater intervention into the Ljubljanica water regime in the respective section was the building of the Grubar channel that diverted the flood flow past the city core. The building was accompanied by high costs regarding compensation of purchase of land and unexpected works caused by geological soil composition. The building took place between 1773 and 1780. The preparations and discussions of the variants of possible interventions date back to 1769, when a decree of Empress Mary Theresa was issued, providing the funds for the building. The proposition of demolishing the dams on the Ljubljanica River and expanding the channel in the city failed to receive a proper support of the city and the States (Brilly, et al., 2003). In 1924, there were great floods of the Gradaščica in the Vič area in the Ljubljana suburbs. Due to settlement needs there were extensive works on the Gradaščica regulation, diverting the water into the Mali Graben channel and building levees in the area between the Gradaščica channel and Tržaška Street. The works continued with regulation works on the Ljubljanica. The Ljubljanica River training was additionally enhanced after the 1933 flood that damaged the city core as well. An integral channel fortification encompassed also regulation works of the urban sewage system that put a stop to a free discharge into the channel, causing unpleasant smells with low water level (Brilly, et al., 2003). As it is mentioned before, floods are very frequent in Ljubljana, and actually in the whole country of Slovenia; in 1990, floods in Savinja River Basin, which is located in the northeast part of Slovenia, caused damages, which amounted to more than 20% of Gross Domestic 35

Flood Impacts on Property Values and Proposals of Measures to Enhance Flood Safety Product GDP. By 2008 Komac, Natek, and Zorn reported that floods in the last 15 years caused 15% of the total damage due to natural disasters in the country. And the last major disaster affecting Slovenia was the September 2010 floods (Komac & Zorn, 2011). They affected 60% of Slovenia municipalities (137), when the total damage was estimated at more than EUR €240 million (including value-added tax, VAT) which exceeded the 0.3% of planned inflows in 2010 national budget. For comparison, the damaged caused by the 1990 floods mentioned above was estimated at more than EUR €500 million (Komac & Zorn, 2011). According to the department of protection, rescue and civil defense of the city administration in 2010, 1013 residential buildings were flooded and the estimated damage (excluding VAT) EUR €3,398,603, other commercial and offices buildings (53) were partially damage, EUR € 923,460 and also there was some infrastructure which was damaged (municipal roads, public lighting and plumbing) and estimated in EUR €1,918,924.

Figure 15. Resident rides his bike in one of the flooded sreets of the wenster part of Ljubljana -Left(AFP/GETTY, 2010) and erial photo of the wenstern part of Ljubljana City flooded in 2010 -right(Vidmar, 2010).

As it is known absolute safety against flooding cannot be ensured, however people prefer to feel safe, they like to pay the lowest cost while asking for satisfying solutions. Kates (1976) found out that people who had experience with floods were more likely to expect that they would reappear, and consequently they act protectively. For the case of Ljubljana, Polic et al. (1991) reported than more than a half of interviews, they made after spring floods for their research, denied the possibility of flood reappearance during the same year, even when floods are very often in Slovenia during autumn and in fact when events reappeared in fall of that year. Ittelson, et al. (1974) reported that lay people tend to exclude themselves from the patter of risk or even they deny themselves of any danger unlike the experts. In Slovenia some flood measures have been implemented specially after floods in 2010, however there are still areas without any flood control mainly in the southern part of the city where there are urbanized areas, hence an appropriate flood management is needed taking into account an integrated approached and joint actions as Brilly and Polic (2004) highlight in their research. For the specific case study of Ljubljana one organization has been contacted, this is a civil organization which is called Civilna iniciativa za poplavno varnost jugozahodnega dela Ljubljane (Civil initiative for flood protection of the South-western part of Ljubljana), this civil organization was established on November 19, 2014 due to the effects of heavy precipitation which caused severe floods in Gradaščica River in 2010, this river is 33km

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Flood Impacts on Property Values and Proposals of Measures to Enhance Flood Safety long and is divided into Mali Graben and Mestna Gradaščica. In 2010, due to the damages caused by flooding the civil organization realized that the existing mitigation measures (channels, embankments and levees) where no longer functional for mitigating the current weather conditions besides flood control has not be undertaken in the area. This initiative started with approximately 180 members but by 2015 the organization has more than 400 members. And what they demand is addressed to state authorities and other stakeholders as well as the city government which is responsible for the regulation of the Glinščica River. Since the time the civil Initiative has been established, it has carried out several activities searching for the support of different authorities and other stakeholders, furthermore it has been involved in meetings and discussions related to mitigation measures undertaken by the government, besides the organization looks for the integrated participation of different professionals, who can enrich any kind of mitigation which are taken to enhance flood safety.

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Chapter 4.

Research Methodology

This chapter details the methodology that was followed to analyze the three case studies and explains the variations for every case taking into account that data were available from different sources and not all of them were exactly the same kind of data, however this research also looks for showing the adversities which can be found when a research depends of data of different institutions and sources.

4.1 Research Design As it is known environmental aspects can be determinants of housing prices, and this research is focus especially in flood events which can have an impact on property values, reason why three case studies were chosen with specific flood events, which actually occurred in the study areas. What basically was done for every case study of this research was to collect the data of the real estate sector and spatial characteristics of either actual flood events or flood hazard extents, which were estimated and/or obtained from different institutions, besides data were analyzed by the method of comparison of mean prices of objects influenced by flood and objects flood free, method which was also used previously by Eves (2002). This methodology consists in comparing property values inside and outside floodplains of actual flood events, the values were also sorted by year to be able to see the impact of actual flood events on property values, later-on mitigation measures were proposed and finally some scenarios were shown considering the economic benefits of the implementation of mitigation measures.

4.2 Boulder, Colorado, United States of America 4.2.1 Data Collection The data for the case study of Boulder, Colorado were obtained from different public sources which are available on several websites. 4.2.1.1 Real Estate Data Regarding the urban planning of the city, there is the official Boulder County Colorado’s website where there are geographic information system downloadable data and from where shape files related to the location and the areas of parcels were downloaded. Just for the city of Boulder there were found around 33,500 parcels (Figure 16) which fit inside the limits of the polygon of the city for Boulder, Colorado; these shape files contain a column with a reference number which could be linked to other databases regarding the property sales, also available in the Boulder County’s website. The assessor’s office section of the Boulder County’s website facilities the access to the contract’s information of sales for residential properties (single family homes, duplex, triplexes, condominiums and manufactured housing), and from this section were obtained data of 4196 sales which were made from 2009 to 2014 with adjusted prices to 2015.

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Flood Impacts on Property Values and Proposals of Measures to Enhance Flood Safety 4.2.1.2 Flood event 2010 Regarding to the flood extents that were taken into account for this research were the ones due to the flood event which occurred in September 2013 (Figure 16), that event caused severe damages to the city of Boulder, Colorado; and the shape file which shows up the extents of this event was obtained from the authorities of the City of Boulder.

4.2.2 Data Analysis Once the parcels and flood extents shape files were obtained, they were mapped out on the software ArcGIS 10.2.2 (Figure 16), which is a commercial Geographic Information System Software from ESRI Company, to identify which properties were physically impacted by flood event in September 2013, hence what basically was done is a classification, fundamentally in two classes: the first one, regarding the properties inside the flood extents and the second one outside the flood extents. Besides the classification was done, the reference number of every parcel was linked to the data base which contains the property values of actual sales made from 2009 to 2014, and then sales were sorted by years to determinate annual trends of what could be the possible impact of floods in 2013 on property values to the City of Boulder, Colorado, taking into account real estate date from before and after the flood event in 2013 as it was already mentioned.

Figure 16. Map of the 2013 flood extents and parcels of properties in the City of Boulder, Colorado, United States (By the author).

4.2.3 Proposal of Mitigation Measures and the Economic Benefits of Possible Scenarios Finally, for this case study, structural and non-structural mitigation measures, which have been already implemented, were analyzed, taking into account the stakeholders, especially 39

Flood Impacts on Property Values and Proposals of Measures to Enhance Flood Safety from the real estate sector that is the main target of this research, figuring out the ways to involve them in the process and searching for the benefits that real estate sector could get due to the implementation of mitigation measures, furthermore an economic theoretical profile is suggested considering once measures are taken.

4.3 Acapulco, Guerrero, Mexico 4.3.1 Data Collection The data for the case study of Acapulco, Guerrero were obtained from different authorities that were contacted. 4.3.1.1 Real Estate Since data of the real estate sector, for this case study, are not openly available on the public’s websites, it was needed to contacted directly to get the data, nonetheless there is not a proper real estate tracing, fact which makes more complicate the study of this case study, however it is important to consider this kind of cases due to most of the countries are in similar situation and also being that this case study was where more fatalities occurred due to the high impact that flooding in September 2013 had, event which was chosen for this research. The data related to real estate sector were given by the company Assessment of Natural and Anthropogenic Risks (ERN, for its acronym in Spanish), which is specialized in natural risk assessment, ERN provided data of property values known as asset poverty, which are sorted in five categories according to the kind of material properties are made of (Table 2). The property values contained in this data base were adjusted considering the inflation experienced in Mexico from 2008, when property values were estimated by Mexican Ministry of Social Development, to nowadays (2015) and these values were also converted from the national currency (Mexican pesos) to US dollars to get a better interpretation about the economic value they actually mean. Table 2. Classification of the properties analyzed for Acapulco City (ERN). Class Description Main Materials Masonry bearing walls 1 level Masonry Urban Housing I Diaphragm-less masonry walls with light cover 1 level Masonry Urban Housing II Wood without diaphragm, with light cover 1 level Lightweight materials Urban Housing III Adobe no diaphragm, light cover 1 level Masonry Urban Housing IV Precarious walls with light cover 1 level Lightweight materials Urban Housing V

4.3.1.2 Flood Event 2010 In the very begging the flood event which was chosen to be analyzed in this research was the flood caused by the two tropical storms: Ingrid, coming from the Gulf of Mexico and Manuel, from the Pacific Ocean, being that the combination of these two events resulted in heavy precipitations which caused severe floods in several areas of the City of Acapulco mostly due to the overflow on La Sabana River. Hence, the file of the flood extents for the event occurred in September 2013 was downloaded from the National Risk Atlas of Mexico’s website; however this file was not used and it was needed to contact the Mexican

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Flood Impacts on Property Values and Proposals of Measures to Enhance Flood Safety National Center for Disaster Prevention, which is in charge of the National Risk Atlas, because it was noticed that the file of the flood extents in September 2013 was not representative of the areas which were actually flooded in that year, the extents covered by the file obtained from the National Atlas were relatively smaller than the area actually flooded in 2013, hence instead of using the file of the flood event in September 2013 it was used other one which represents flood hazard areas and which was given by Mexican National Center for Disaster Prevention but made by Mexican National Water Commission in 2001 (Figure 17).

4.3.2 Data Analysis For this case study the layers (shape files) regarding the hazard flood and properties were mapped out in the software ArcGIS 10.2.2 (Figure 17), afterwards a selection of the properties was made according to the location of the properties and the flood hazard extent, taking into account the five categories showed in the previous Table 2. For this case study there were not data available to certain period of time due to neither government nor any other company had an appropriate date base regarding real estate of the kind of properties which were analyzed in this research, issue that does make more complicate the estimation of the actual impact of flooding on property values.

Figure 17. Flood hazard and location points of residential properties classified as asset poverty of the Acapulco City, Guerrero, Mexico (By the author).

4.3.3 Proposal of Mitigation Measures and the Economic Benefits of Possible Scenarios Finally for this case study a graph was made according to different kind of asset poverty and 41

Flood Impacts on Property Values and Proposals of Measures to Enhance Flood Safety the location, and also some qualitative discussion was developed with the objective of suggesting mitigations measures which could be implemented in the study area, considering the current situation which could be describe with photographic material available from different sources which are shown in the next chapter.

4.4 Ljubljana, Slovenia 4.4.1 Data Collection The data for the case study of Ljubljana, Slovenia were obtained from different public sources which are available on several websites and also by authorities that were contacted. 4.4.1.1 Real Estate The real estate data of 564 sales of residential properties, made from 2008 to 2014, were taken into account; these data were provided by the Surveying and Mapping Authority of the Republic of Slovenia. 4.4.1.2 Flood event 2010 For the case study of Ljubljana, Slovenia, the flood event which was analyzed is the one that occurred in September 2010 mainly by the Mali Graben River which is a tributary of Ljubljanica River. The files of the flood extents were obtained from the Slovenian Environmental Agency’s website (Figure 18). 4.4.1.3 Questionnaire Data were also obtained from an online questionnaire which was made to be filled out anonymously by members of the civil initiative, the questionnaire was available on the official organization’s website, Civil initiative for flood protection of the South-western part of Ljubljana, and also 180 printed questionnaires were emailed by post through the same civil organization which already had the members’ postal addresses. The questionnaire (See appendix 1) has questions regarding general information about the properties, as the year when the properties were built, and some other questions more specifics about the understanding of flood hazard maps and awareness of being or not in a flood prone area, there are also some questions about the property owner’s experiences regarding to floods in terms of economic damages and what mitigation measures they have taken after these events, being that property owners are key piece of flood risk management and they can suggest some structural and non-structural mitigation measures according to their empirical knowledge which is not necessarily scientific but it is based in what they have been experimented in previous flood events. The questionnaires also look for identifying what is the possible impact that flooding can reach in terms of real estate, this according to property owner’s perception, and what mitigation measures they believe are needed to be done to enhance flood safety. Finally it was asked how often are acceptable floods to occur, how they believe they have to be protected against floods and who is responsible of this. The results of these questionnaires are shown and analyzed in the next chapter together with the possible mitigation measures which could be implemented and possible economic benefits that they 42

Flood Impacts on Property Values and Proposals of Measures to Enhance Flood Safety could bring.

4.4.2 Data Analysis Real estate data were adjusted considering the inflation experienced to 2015 and later-on were also mapped out (Figure 18) and classified according to the location, taking into account flood extents of 2010 and sorted by year, pretty much the same that was done for the case study of Boulder, Colorado, but instead of using files which contain parcels, a layer with dots was used, where each dot represents a sale and the location of the related property, afterwards the sales were sorted by year, thanks that the attribute table of this layer had information regarding to when the sales were made (2008 to 2014).

Figure 18. 2010 flood extent and location points of residential properties of the Ljubljana City, Slovenia (By the author).

Besides of the classification of the sales by location and by year of the real estate sector, questionnaires were analyzed and compared the respondents’ perception versus actual data estimate from the quantitative results.

4.4.3 Proposal of Mitigation Measures and the Economic Benefits of Possible Scenarios At last some mitigation measures were also analyzed and proposed for this case study; and for this section some of the answers from the questionnaire were taken into account being that property owners are key piece, and they actually could give some feedbacks about their concerns with regard to mitigation measures and some of them have even taken actions to mitigate floods.

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Flood Impacts on Property Values and Proposals of Measures to Enhance Flood Safety Furthermore, some theoretical profiles were developed and comparisons of the different scenarios were made, considering that there are several factors which could affect the real estate market dynamics and being that different stakeholders could be benefited by the implementation of flood control.

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Chapter 5.

Results and Discussions

This chapter shows the results of the analysis made in the previous chapter and also discusses the final information which is obtained, besides this chapter shows some possible economic benefits which could result of the implementation of flood mitigation measures. As Lamond (2006) reported in her research the temporal dimension is important in any case study, taking into account that measured impacts are very likely to vary largely according to local circumstances. Furthermore, this research was not the exception, for the case studies investigated in this research unexpected results were actually found, showing different trends which are supported by the literature review. As first view the second theoretical profile described in the literature review can be matched especially with two case studies (Boulder and Ljubljana), this profile is when flood effect is permanently capitalized into the property value, however looking more in detail at the data there were more findings which are described later-on in the current chapter, for the other case study (Acapulco) unfortunately enough data were not available to be able to analyze what is occurring there, however that case study was still considered due to that most of the human loss of life by the impact of floods occurred in September 2013 and also because properties were very damaged.

5.1 Boulder, Colorado United States of America 5.1.1 Floods and Real Estate The following Figure 19 shows the adjusted mean property values for the residential properties in Boulder, Colorado, United States from 2009 to 2014, and as it can be seen there is a trend where mean values are increasing slightly since 2009 having a maximum value in 2014 and the minimum value in 2009 just after a severe financial and economic crisis impacted United States and when house prices started to fall dramatically, however the objective of this research in not how economic crisis can affect real estate market rather it is what the relationship between flood and real estate is. For this research was expected negative impact on property values after floods in 2013, due to most of the literature review says that is pretty common to find negative effects especially after real events, however it did not occurred, actually property values continue increasing slightly with regard to previous years; property values in 2014 were 2.8% higher than in 2013, in perceptual terms do not look like a very high value nonetheless it was not expected. This kind of profile in terms of the whole community matches better the one where flood effects are already permanently capitalize into prices, but it still too soon to get some general conclusions and later-on is shown up other findings of this research which can help to know what the relationship between floods and real estate is.

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Thousands

Mean property value (US $)

Flood Impacts on Property Values and Proposals of Measures to Enhance Flood Safety 900 850 800 750 700 650 600 550 500 2009

2010

2011

2012

2013

2014

Year Figure 19. Mean values (USD) for the residential properties in Boulder, Colorado, United States from 2009 to 2014..

Thousands


Figure 20 shows the adjusted mean property values for the residential properties inside the floodplain from 2009 to 2014 and on the other hand outside the floodplain, regarding the flood extents in 2013 in Boulder, Colorado, United States. What was expected in this research is that property values in the floodplain would be lower than outside the floodplain, however opposite results were obtained; property values inside floodplain were higher than outside the floodplain during the entire period that property value data were available, the mean difference is 8.25%, having a minimum difference in 2011; residential property values in floodplain were 1.1% higher than outside the floodplain, slightly high in 2012 (2%) and unexpectedly in 2013 prices were even more different, property values in the floodplain were 13.5% higher than outside the floodplain and for the next year (2014) this difference decreased to 9.5%, and again no expected results came out, fact which addressed this research to continue analyzing the data to figure out what are the possible impacts of floods on real estate market. 900 850 800 750 700 650 600 550 500 2009

2010

2011

2012

2013

2014

Year Floodplain

Outside the floodplain

Figure 20. Mean property value (USD) for residential properties from 2009 to 2014 taking into account two categories, one which represents the properties inside the floodplain and the another one the properties outside the floodplain, considering as reference area the 2013 flood extents in Boulder, Colorado, United States.

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In the following Figure 21 can be seen the number of signed contracts regarding the residential properties in the city of Boulder, Colorado, United States. This is particulary important because shows significant information which describes the relationship between flood events and real estate market. As it can be seen in the previous figures, property values did not show very sharp changes in the property values during the period which was analyzed from 2009 to 2014, however in this research was found a fact that ussually is not analyzed in other researchers, which is the number of sales and which is also related to finincial aspects and/or natural aspects as can be floods. In the Figure 21 is shown that the lowest number of sales was in 2009 inmeadetely after the financial and economic crisis in the United States, when only around 372 contracts were made of which 318 were outside the floodplain and 54 inside the floodplain, being larger the number of sales outside the floodplain, since the area is also larger than inside the floodplain and also there are a lot more properties. In the figure can be seen that the year with the largest number of sales was in 2013 (with 989, which of 132 are in the floodplain and 857 outside the floodplain), exactly when flood events occurred in Boulder, Colorado, for the following year (2014) there is a sharp drop in the number of contracts, 52% less contracts than 2013, inside (52.3%) and outside (51.9%) the floodplain regarding the previous year in the same area. It actually means that flood impacted not only the flood prone area, rather this event affected the real estate market of the whole community as it occurred at Des Plaines, Illinois, United States (in 1986 and 1987), however the adverse impacts for the community just mention impact property value rather than number of sales or at least that is what is reported by Tobin and Montz (1994). 1200

# of Contracts

1000 800 600 400 200 0 2009

2010

2011

2012

2013

2014

Year Total

Floodplain


Figure 21. Number of contracts from 2009 to 2014 in Boulder, Colorado, United States.

The previous Figure 21 is a clear example of how floods can impact real estate market; likely not in terms of price properties but in terms of number of signed contracts, in 2014 more than half of the number of sales dropped down regarding the previous year when floods occurred in Boulder, Colorado, United States, almost to fall down to similar levels than in 2009, just immediately after a severe economic crisis hit the United States as it is mentioned before, however it would be interesting to show what is happening for 2015, fact which can be continued in future researchers.

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5.1.2 Mitigation Measures After the September 2013 flooding which was declared a national disaster in the United States, the city of Boulder, Colorado has been working in around 300 projects which include mitigation measures as part of the floodplain management program of the city, some of the current projects which were found in the official website of the City of Boulder are mentioned bellow and include structural and non- structural mitigation measure. 

Near-term flood mitigation improvements along Wonderland and Fourmile Canyon creeks. The Wonderland Creek (Foothills Parkway to Winding Trail Drive) Greenways Improvements (Figure 22) project is proposed to implement flood mitigation measures along Wonderland Creek from Winding Trail Drive to Foothills Parkway, and extend the multi-use path from Foothills Parkway to Winding Trail Drive. This project will include a bicycle and pedestrian underpass under the BNSF railroad, Kalmia Avenue and 28th Street. Funding for the construction of these improvements is through a bond, with additional outside funding of US $2.9 million through the Transportation Improvement Program TIP. Funding originally budgeted for this project has been reprioritized to address immediate flood recovery expenses. This project is anticipated to go to bid this fall and is expected to take about two years to complete.

Figure 22. Bicycle lines and pedestrians implemented in Boulder City, Colorado (USA Today, 2013).



This kind of projects besides being a flood mitigation measure they can even increase property values adding an aggregate value to property prices, because furthermore of taking into account protection aspects they are also looking for considering landscape aspects where recreational activities for the public could take place instead of only being for protecting areas, and that’s why so important to involve specialist of different disciplines making flood risk management a multidisciplinary process.

The previous program is an example of structural mitigation measure which not necessary have a lot of infrastructure to archive its objective which could actually bring economic benefits due to its low cost to be done. 

Design of flood mitigation improvements along the creeks. The City Council will be reviewing several plans related to mitigation measures, the following Figure 23 shows the measures are planned to Wonderland Creek which is located in the northern part of the City of Boulder Colorado, the main objective of this proposal is to improve measures by means of greenways which can actually be used for 48

Flood Impacts on Property Values and Proposals of Measures to Enhance Flood Safety recreational activities and can even increase values of properties nearby.

Figure 23. Design plan for Wonderland Creek Greenways (City of Boulder, 2015).



Design and construction of localized storm drainage improvements throughout the city will be preceded by updating the Storm-water Master Plan. Improvements include storm-water collection and conveyance facilities designed to convey twoyear and five-year floods.

The following Figure 24 shows how a storm-water collector works, then rainfall water can be used and without being mixed with the water from the sewer system and it means that the water captured by the storm-water collector can go directly to rivers and/or streams without passing before by treatment water plants.

Figure 24. Storm-water collector’s scheme (Piedmont Triad Regional Council, North Carolina, Division of Water Quality, 2013).

There are several studies which have helped to determinate which mitigation measures are going to be implemented in Boulder, Colorado, one of these studies is the South Boulder Creek Flood mitigation Study, and some of the mitigation mentioned there are written bellow, however a few of them are described more in detail due to the positive impact that they could have in property values.

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Flood Impacts on Property Values and Proposals of Measures to Enhance Flood Safety Open channel and pipeline/culvert improvement, embankment, streams, creeks and ditches, detention sites, storages upstream, berms, lower roads, protecting grading, detention pond limits, excavation areas, remove buildings from high hazard areas and conservation of areas with characteristic ecosystems like wetlands which are important because provide many functions which include: groundwater recharge, nutrient cycling, primary production, carbon sequestration and export, sediment transport, and channel stabilization. One of the most important functions is the role of wetlands in providing clean water. Wetland vegetation acts as a filter or sponge for water and sediment that may contain heavy metals, pesticides or fertilizers. Wetland vegetation also provides a buffer for flood zones, especially along larger rivers that flow through Colorado’s cities and town. In addition, wetlands play a key role in many of the recreational activities Colorado is best known for, including hunting, fishing, wildlife viewing, and rafting (Colorado Wetland Information Center, 2013). To carry out the activities just mentioned above it is important a multidisciplinary process involving the participation of engineers for characterization of hydrology processes and construction of structural measures, besides professional from different disciplines to improve the measures, furthermore public meetings are also important and engagement of authorities as well. The next scheme (Figure 25) shows the basic steps followed to make any plan related to water management in the United States which can be also implemented in any program related to flood mitigation measures.

Design

Monitor

Implement Check

Adjust Evaluate Figure 25. Scheme of the steps which have to be followed for any plan related with water management in the United States.

5.1.3 Theoretical Profile of the Positive Economic Impact due to the Implementation of Mitigation Measures in Boulder, Colorado, United States. The following Figure 26 suggests a hypothetical case where a polynomial function was

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Flood Impacts on Property Values and Proposals of Measures to Enhance Flood Safety determined with a high correlation to the actual data of 0.9202, as it is shown below, where the number of sales (1012 instead of 475 sales) in Boulder, Colorado does not decrease for 2014; it actually follows the trend which was held until 2013 when flooding occurred. What it is proposed in this example is what would have been if flooding would have had an impact on real estate sector, this sector could be actually benefited firstly because property owners, who will to sell their properties, would not have reduced to more than half per cent (52%) as it actually occurred and secondly because government would have been benefited as well considering that on average 2.9% for every property which is sold it would have had to be paid (according with the Department of Revenue in Colorado) for sale taxes, and if it is taken into account that the mean property value by 2014 was around US $784,889.00, then it means that by 2014 there was an approximate loss of at least US $12,223,073.20, just because less properties were sold and less taxes were given to the government. 1200

# of contracts

1000 800 600 y = -23.607x2 + 286.19x + 145.2 R² = 0.9207

400 200 0 2009

2010

2011

2012

2013

2014

Year Total

Poly. (Total)

Figure 26. Hypothetical case for 2014 where the number of contracts does not decrease after 2013 when flooding occurred in Boulder City, Colorado estimated with a polynomial function and a correlation of 0.9207.

According to the total cost due to flooding in 2013, US $ 28 million represents the flood damage and recovery activities after further investigation of damages and assessment of repair and recovery alternatives for the city of Boulder Colorado, which actually means that at least 40% of the costs, could have been prevented by flood control. Figure 27 shows the actual total value of the sales from 2009 to 2014 and on the other hand also the trend of the total value of the sales followed until 2013 just before flooding and the value of the sales for 2014 according to this trend. This figure was made to show the likely amount of money in case flood events would not have impacted in September 2013, regarding with the statistics values if floods would have had an impact then the total value of sales by 2014 would have been above US $800,000 million, when actually the total value of sales for that year was around US $377,800 million, which means just 46% of the expected values for 2014, having a loss on the real estate sector larger than 50%.

51

Thousands

Value of Sales (USD)

Flood Impacts on Property Values and Proposals of Measures to Enhance Flood Safety 900000 800000 y = -2E+07x2 + 2E+08x + 1E+08 R² = 0.9459

700000 600000 500000 400000 300000 200000 2009

2010

2011

2012

2013

2014

Year Actual total value of sales

H. Total value of sales

Poly. (H. Total value of sales)

Figure 27. Actual total value of the total sales and hypothetical value for 2014 where the total value of the sales did not decreases after 2013 when flooding occurred in Boulder City, Colorado estimated with a polynomial function and a correlation of 0.9459 to the data until 2013.

5.2 Acapulco, Guerrero, Mexico 5.2.1 Floods and Real Estate Mexico's geographical location makes it one of the few countries subject to hurricanes generated in two distinct areas: the Northeast Pacific and the North Atlantic. This makes country vulnerable to the onslaught of tropical cyclones, as it was confirmed by the recent catastrophic case of Hurricane Odile (2014) on the peninsular of Baja California, or the simultaneous onslaught of tropical cyclones in 2013, Manuel in the Pacific Ocean and Ingrid in the Gulf of Mexico (Appendini, 2014) which were the actual determinants of floods in 2013. However as it was mentioned in the methodology, for the case study of Acapulco, Guerrero, similar data were not available as they were for the other two case studies. Nonetheless the Figure 28 characterizes the data, which was obtained for this case study, and how property values are distributed according to the five categories of asset poverty, inside and outside the floodplain. For most of the classes the price of the properties inside the floodplain used to be higher, finding the largest difference for the class II, which is related to asset poverties which characteristics are: diaphragm-less masonry walls with light cover and 1 level, for this class the mean property values inside the floodplain were 21.5% more expensive than outside the floodplain. The opposite occurred with the class V (Precarious walls with light cover, 1 level), which mean property values were 14.3% more expensive inside the floodplain than outside. For the other three classes property values were more expensive outside the floodplain and the percentages varied from 5.7% to 17.2%.

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Thousands



1000 800 600 400 200 0 I

II

III

IV

V

Class Floodplain


Figure 28. Mean property value of five categories of asset poverty in the City of Acapulco, Guerrero, Mexico in 2008.

By 2013 Acapulco City was hit by two tropical storms and it is known that there were many communities which were flooded due to this storms and even more than 100 people died, however open real estate data are not available for this period and even nowadays, besides the flood plain which was characterized for this even was not even representative, that is why the flood hazard layer made in 2001 by National Water Commission is used for this research, being that this layer characterized better floods which occurred in 2013. Hence what this case study clearly shows is an example of miscommunication between stakeholders and decision-makers, because even when it was known that there was a flood hazard in the area many properties were allowed and built, and in the following years as it was likely floods impacted the area damaging many properties, hence there is question of how decisions are being made and whether stakeholders are aware about the risk the can be at. Furthermore it also important to mention that property owners of this case study are not informed by the authorities about flood hazard, fact that makes them to be more at risk, considering that at least for the properties analyzed for this case are very vulnerable due to the material they are made of and poor mitigation measures nearby. Hence this is an issue which has to be solved integrating all the stakeholders. Unfortunately data could not be analyzed through a temporal dimension; hence the relationship between floods and real estate was not determined as it was supposed to be and as it was done for the other two case studies, however it does not mean that this area has not to be taken for future researchers, it actually demands involving authorities and property owners to make an appropriate flood risk management to enhance flood safety due to the high probability that this area hast to be impacted by rainfalls resulting from tropical storms. The following pictures (Figure 29) show the impacted areas by floods in 2013 which are actually not been represented by the shape file of the flood extents given by the National Atlas of Mexico, which can be seen in the Figure 31.

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Figure 29. Asset poverties affected by flood in 2013 in the neighborhood El Marqués –Left- (SinEmbargo, 2013) and people mobilizing through streets in the City of Acapulco, Guerrero –Right- (CNN México, 2013).

In the following pictures (Figure 30) show the Acapulco International Airport, which was impacted by flood in 2013, the pictures are shown to justify why the file available in the National Atlas of Mexico is not used, due to its uncertainty, in the pictures it is very clear that the international airport was flooded however in file available by the National Atlas of Mexico it is not.

Figure 30. Acapulco International Airport (CNN México, 2013).

Figure 31 shows two different flood extents, one is obtained from the National Atlas of Mexico (Light blue), which is public information shown on the website of this institute; this flood extent is meant to represent the flood extents in 2013, however it does not and it may be due to the technic which was used to estimate the flood extents as it was report by Mexican National Center for Disaster Prevention when it was contacted for this research and reason why another file was used (Transparent light blue), which shows the flood hazard for the area of Acapulco made by the National Water Institute in 2001 and file that characterizes better the flooded area in 2013.

54


Figure 31. Flood hazard estimated by the National Water Institute of Mexico in 2001 and flooded areas in 2013 according to the National Atlas of Mexico (By the author).

Being that inaccurate flood extents information is available, besides that no enough real estate data are available, hence it is hard to report results regarding how the relationship between floods and real estate is.

5.2.2 Mitigation Measures Flooding caused around US $4.2 billion in damages according with the estimated amount by the insurance company Aon Benefield (2013) and nearly 100 deaths, hence in section besides of mitigation measures it also look to show the actual status of the area which was flooded in 2013, and afterwards some mitigations which could be implemented in the area which have been already suggested. Figures which are presented below are in locations along La Sabana River, and what it can be seen is that flooded areas in September 2013 are firstly quite close to the urban development and secondly there are no mitigation measures at all, reason why actually natural disasters can be expected, in this case flooding due to heavy precipitations and overflowing taking into account that this area is exposed to very frequent tropical storms besides that there is a considerable urban development by the river. Figure 32 shows a picture taken from Google Street (2014) where it can be seen the current status of the river; and it is shown that properties are quite close to the river furthermore it seems that there is not any mitigation measure to protect this area; this picture was taken inside of the area which was flooded in 2013 due to the heavy precipitations caused by the Hurricanes Manuel and Ingrid. With this example there are some questions to be analyzed, considering if floods in 2013 were result only of extreme unusual events or because of human mistakes, how these floods actually impact the real estate, taking into account that 55

Flood Impacts on Property Values and Proposals of Measures to Enhance Flood Safety there are almost no information about it.

Figure 32. View of the street along the River La Sabana (Google Street View, 2014).

In the following figure can be appreciated the kind of constructions which are by the River La Sabana in Acapulco and it is clear that properties are not adapted to suffer the impacts of severe floods, being that the kind of material is not the appropriate to cope with the impact of flooding, but even so the total economic damage of this natural disaster was a lot higher than the estimated for the other two case studies.

Figure 33. Paseo de La Sabana Street (Google Street View, 2014).

What is shown very generally with the previous figures is that the community is not ready to 56

Flood Impacts on Property Values and Proposals of Measures to Enhance Flood Safety cope with such impacts of flooding, fact that make the community to be at risk due to the high level of vulnerability to hazards which in this case would be floods. Regarding the mitigation measures there are some options already suggested in previous investigations, Mejía (2014) has suggested embankments along the river as it is shown in the following Figure 34, the embankments would protect urban areas and would make the flow to be discharged in the lagoon Tres Palos, located on the bottom right of the picture below. For this mitigation measure is taken into account topographic characteristics of the case study and later-on the flow is estimated to know the possible flooded area.

Figure 34. Embankments along the River La Sabana (Mejía, 2014).

Once the embankments were designed the flow was estimate to get the possible flooded areas with and without any mitigation measure (Figure 35).the numbers represent different areas; the number 1 is where residential areas were flooded in September 2013, which can actually see in the picture below on the left side, number 2 is the area by where the flow goes to the lagoon, number 3 is where important touristic development takes place and which could be protected by the mitigation measure and 4 is where are registered the highest elevations by the lagoon.

Figure 35. Flooded area in September 2013 -left- and estimated flood area with embankments along the River La Sabana –right- (Mejía, 2014).

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As it was mention by Mejía (2014) the mitigation measures can be improved considering landscape characteristics and specific detail about the hydrological conditions in the area to prevent negative impacts in the area and even to increase the value of properties located in this area.

5.3 Ljubljana, Slovenia 5.3.1 Floods and Real Estate Ljubljana is the last but not least case study analyzed in this research, the following Figure 36 shows the adjusted mean values for residential properties for this case study where it can be seen there has been an important decrease for the whole period that data were analyzed. The maximum values which can be seen are in 2008 and 2009, just after the financial sector of the country was hit by the global financial crisis as it is reported by the International Monetary Fund (2012). The financial sector remained vulnerable with continues deterioration and refinancing risks due to weak governance in public banks and externally financed boom in lending to construction companies and management buyouts. According with the following figure the lowest mean property values are found in 2014, year which is the most recent one when data are available. After flood events in 2010 it cannot be seen any important change regarding the trend that the mean property values had to the previous year, even when property values were actually 9% lower than in 2010, because as it is shown in Figure 36 there was a constant decrease in property values since previous years, being the largest difference is between 2009 and 2010 (17.5%), just after the world economic crisis happened, and year (2010) when Slovenia became a member of the Organization for Economic Co-operation and Development OECD, this financial crisis started in the United States in 2007 and involved financial institutions in many OECD countries. It was only when the crisis turned into a global economic recession that developing and emerging-market economies were affected, mainly through the trade channel, and in some cases through workers falling remittances. In many development countries, the economic consequences of these indirect effects were as severe as the direct effects were on developed countries. The world recession, the first since the Second Word War, led to a reduction of world GDP by 0.6% in 2009 (United Nations, 2010). On the other hand there was also another decrease on mean property values between 2013 and 2014 (17.1%), just after the European Union EU was facing a financial crisis which impact several European countries members of the EU, therefore in general terms could be said that floods are already permanently capitalized into price for this case study due to the decrease is not result of flood events rather other financial factors, however it is explained better in the next figure which is presented in this research.

58

Thousands

Mean property value (EUR €)

Flood Impacts on Property Values and Proposals of Measures to Enhance Flood Safety 450 400 350 300 250 200

Year Figure 36. Mean values (EUR) for the residential properties in Ljubljana, Slovenia.

The previous figure shows that the impact of floods on property prices is not really transcendental which means a permanently capitalized of floods into price according to the theoretical profiles, however when properties were classified into two different categories (Figure 37): inside the floodplain and outside the floodplain, it can be seen that, properties inside the floodplain tend to be lower than outside the floodplain for almost every year of the analyzed period with the exception of one year when occurs the opposite, 2014, when mean property values are actually higher inside the floodplain than outside, however there was not a clear reason of why this change is happening being that the distribution of the properties was pretty similar for every year and the number of data was also similar for both cases, nonetheless it is a fact which could be develop in future researches. The largest difference regarding property prices found between the two categories was in 2008 and 2009, being values 22.3% higher outside the floodplain than inside, the data of these two years were joined because there were only a few data of each of these years, due to in this period was when the Surveying and Mapping Authority of the Republic of Slovenia started to collect the data in its database. The smallest difference occurs in 2010, just when floods occurred (8.8%), for the following year (2011) properties outside the floodplain are slightly more expensive (from 8.8% to 13%) than inside with regards to the previous year when flood events impacted the area and the same trend continues for the following years (2012 and 2013), however for 2014 something unexpected occurs when mean property prices in the floodplain are even greater than the mean property prices outside the floodplain (12.4%) as it can be seen in the following figure.

59

Thousands

Mean property value (EUR €)

Flood Impacts on Property Values and Proposals of Measures to Enhance Flood Safety 450 400 350 300 250 200

Year Floodplain


Figure 37. Mean property value (EUR) for residential properties in the floodplain and outside the floodplain, considering flood extents of the event that occurred in September 2010 in Ljubljana, Slovenia.

Figure 38 shows the number of contracts by category (floodplain/outside floodplain) and also the total number of contracts by year, and as it can be seen there are more contracts made outside the floodplain but it was because the area is larger than the one inside the floodplain furthermore there more properties in general. The following figure shows some fluctuations in the number of contracts particularly outside the floodplain, unlike the case study of Boulder, Colorado this area did not show any negative impact in the number of contracts signed the following year just after the flood events in 2010, actually in 2011 the total number of signed contracts was 5.4% larger than in 2010, for the flood plain 12.7% and on the other hand the number of contracts inside the floodplain was 18.2% lower in 2011 regarding 2010, however there are only a few data and for this case this percentage means 4 signed contracts less in 2011 than 2010, which is different outside the floodplain because in 2010 there are 71 signed contracts and in 2011 there are 80 signed contracts.

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Flood Impacts on Property Values and Proposals of Measures to Enhance Flood Safety 120

# of Contracts

100 80 60 40 20 0 2008&2009

2010

2011

2012

2013

2014

Year Total

Floodplain

Out the floodplain

Figure 38. Number of contracts from 2008 to 2014 in Ljubljana, Slovenia, considering flood extents of the event that occurred in September 2010.

Hence this case study only shows how different case studies can be, being that not only property values can represent what the relationship between floods and real estate is, because there are also some other impacts which cannot be seen immediately, nonetheless they are also result of flood impacts on real estate.

5.3.2 Questionnaire Analysis The current section of this chapter shows the results obtained from the questionnaires which were available to property owners, who are members of the civil organization. As it was mentioned the questionnaires were available online in the civil organization’s website and they were also sent by post service to 180 different properties from which 49 (27.2%) questionnaires were sent back by the property owners and another 37 were answered online, which means that 86 of the total property owners, who are members of the civil organization, responded the questionnaire, and in the following figures are represented the answers that respondents gave. Figure 39 shows the periods when the properties were constructed, as it can actually be seen most of the respondents (55%) said that their properties have been built between the years 1956 and 1978, and basically only 17% before this period and nearly 30% after in the most recent years.

61


-1934 17%

6%

5%

6%

1934-1945

3%

1945-1956 1956-1967

8%

1967-1978

29%

1978-1989

26%

1989-2000 2000-2014

Figure 39. Year when properties were built.

The questionnaires showed (Figure 40, left) that more than 60% of the respondents did know what a flood hazard map is, around 25% were not sure and only 14% did not know what a hazard map is, however it is important to highlight that all the respondents of this questionnaire are members of the civil organization which actually does a lot to inform people about the risk they are at, on the other hand the below (Figure 40, right) is also shown that nearly 80% of the responds identified their property for being located in a flood prone area and only around 22% are not sure about it or they said their property is not in a flood prone area, again the target group of this questionnaire are the members of the civil organization who actually voluntarily joined to the organization due to they may suffer flood impacts in their properties, and this is why more of the responses tend to be affirmative.

10% 24%

Yes

12%

No 14%

62% 78%

I am not sure

Figure 40. On the left the answer to the question: Do you know what a flood hazard map is? And in the right the answer to the question: Is your property located in a flood prone area?

According with the answers of the questionnaire 83% of the respondents said that their property has been flooded and only 17% said that their property has not been flooded, for those who answered affirmatively the said that at least twice their property has been flooded, regarding to the respondents (74%) who said that their property has been damage the average cost they had to pay was around EUR €11,330.00, however most of them (74%) have a property secured by a package which also covers flood damages.

62


17%

26%

26%

Yes No 74%

83%

74%

Figure 41. On the left there is the figure of which shows the answer to the question: Has your property been flooded? In the center the answer to the question: Has your property suffered some damage due to flooding and in the right side figure are represented the question: Is your property secured by a package which also covers flood damage?

In terms of insurance costs, the Figure 42 shows that 31% of the answers report that property owners have observed an increased in this expense versus the 36% of the respondents who did observe any increase and 33% who actually were not sure if there was any increase regarding insurance costs especially after flood events.

31%

33%

Yes No I am not sure

36%

Figure 42. Answers to the question: Have you observed any increase in insurance costs after flood events?

There were also some questions more focus in the property owner’s perception whether there is a negative impact on property values when the property is located on a flood prone area or not. For this question an average was calculate and the mean value was 29.3%, respondents think that properties in flood prone areas are cheaper than in non-flood prone areas, fact which was actually true until 2013, taking into account the flood extents of the event which occurred in September 2010 in the city of Ljubljana, Slovenia, as it is shown in the Figure 37, from 2008 to 2013 property values were in average 15.2% lower in the flood extents, which means that respondents overestimated the actual flood impact on property values by almost twice the actual value. However by 2014 something different is shown, which was actually the opposite, properties in flood extents were sold more expensive (12.4%) than properties outside the flood extent. Nevertheless, this research did not go more into details about this fact due to limitation of time and data, but it can be the objective for future researchers. On the other hand the respondents said that houses adjacent by the river are valued in average 20.3% higher than the ones which are not in such area, and in this sense the University of Wisconsin (2008) developed a guide which is meant for people willing to buy a property by the waterfront, which includes the obvious aspects which have to be taken into account like travel expenses, property taxes, maintenance and upkeep and some other 63

Flood Impacts on Property Values and Proposals of Measures to Enhance Flood Safety aspects which are less obvious like dues or taxes required by local organizations or authorities, installation or adaptation against erosion hazards and/or control of invasive plants. Furthermore there are some other aspects which have to be considered in the real market sector of adjacent properties to the waterfront like the characteristics of the shoreline, river bottom, plants and off course floodplains, because as it is mentioned in the guide made by the quality of the river, the shore and bottom are as important as the house. Regarding the remaining questions of the questionnaire, they are presented in the following section of this chapter since they are more related to the proposal of mitigations measures suggested by the respondents who are mostly property owners and also members of the civil organization which has been described several times in this research.

5.3.3 Mitigation Measures Required by the Civil Initiative Mitigation measures can vary very widely according to the situation of every case study and for this section the mitigation which are taken into account are basically the ones identify by the Civil initiative for flood protection of the South-western part of Ljubljana, which also highlight the importance of working in a multidisciplinary team to get more successful results. The civil initiative has required the following actions which can be found also in the documents available in its website: 

Notification systems in case a “fast flood” occurs, which could be understood as warning systems, considering temporary groups would be responsible of this task while the warning system is setup.



Information centers to warn about flash floods and frequent events which are likely to occur in the south-western part of Ljubljana City, these information centers could spread quickly reliable information, give flood-protection bags and any other material used for flood control.



Setup a new gauge station between the estuary of Horjulka River and the Bokalce Dam, since placing gauge stations would be better to make a proper measure of the flow of the Gradaščica, Mali Graben and Glinščica rivers. Furthermore the renovation of existing gauging station Dvor-Gradaščica and installation of new gauge stations downstream Gradaščica River and upstream Horjulščica Rive with automatic connection to water gauges for warning residents from floods.



Immediate restoration and regulation of Gradaščica, Glinščica, Mali Graben and Horjulščica channels. Cleaning and deepening of channels and thereby increase the fluidity. Cleaning of river gates on the Bokalce dam, repair of demolished levees and gates.



Ensuring sustainable funding sources for flood control at the municipal and national level.

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Flood Impacts on Property Values and Proposals of Measures to Enhance Flood Safety 

Expert examination of possible measures, streamlining of procedures and diversion of financial resources in the obtaining of all necessary permits to carry out complex flood protection activities. Priority treatment and priority allocation of the necessary permits.



Adoption of measures to prevent the building in floodplain areas and change municipal spatial plan in the Municipality of Ljubljana.



Amendment of the Law on Concessions in water management. Possibility of cleaning river channels by involving local participation

5.3.4 Mitigation Measures Required by the Respondents of the Questionnaires Regarding to the questionnaires there are some mitigation measures which have been already implemented by property owners and according to the respondents of the questionnaire 75% of them (Figure 43) have implemented some mitigations due to flood impacts. The respondents have said that they have raised floors, cleaned ditches and canals near the property, talked with competent on measures to reduce flood risks, made a plan of action in case of floods, implemented pumps, dikes, disinfected the garage, built flood gates and front ramps, installed check valves in the sewer pipes and one of the respondents even mentioned that he has done an app which is connected to the flows of automatic stations and when these stations register some kind of risk due to flooding an alarm is activated and the users receive a text on their cellphones.

25% Yes No 75%

Figure 43. Answer to the question: Have you implemented any mitigation measure due to flooding?

Figure 44shows the mitigations which are suggested by the respondents in order to mitigate future impacts due to flooding, as it can be seen in the following figure, the measures which were more popular between the participants are: Deepening the rivers (77%) and increasing of flood mitigation areas (77%), followed by restriction of new buildings construction (67%), that is quite related with urban planning along the rivers, and they also chose the implementation of embankments (58%). Besides of these measures there were some other mitigations which were taken into account by the participant, nonetheless these measures are

65

Flood Impacts on Property Values and Proposals of Measures to Enhance Flood Safety basically what they have done after flood impacts and the ones are just mentioned above with the answers of the previous question. 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

77%

77% 67%

58% 38% 21%

15%

12% 0%

Figure 44. Mitigations which are suggested by respondents to mitigate flood risk.

The following pictures show the current conditions by Mali Graben. Figure 45 shows the current condition of the canal and that is why this figure is presented, being that some of the mitigation measures which have been said by the participants are maintenance and upkeep the canals. Due to vegetation can be an issue because grows year by year, hence these areas need to be maintained under specific conditions so that can mitigate the impact of flood impact on properties which are located by the canals. Because as it is know if the vegetation becomes an obstacle for the flow some parameters can increase as it is the case of Manning Coefficient which is related to the roughness of the surface of the rivers and canals.

Figure 45. Condition of the Canal Mali Graben by summer of 2015 (By the Author).

Considering that some areas are highly exposed to the flood impacts as it is shown in the Figure 46 where can be seen that in the left part of the picture there is the canal Mali Graben 66

Flood Impacts on Property Values and Proposals of Measures to Enhance Flood Safety and in the right side there are properties almost immediately to the canal. For this case would be reasonable to make deeper the canal taking into account that properties are pretty close to the river, however some modeling about the supposed mitigation measures could help to determinate what would be actually the best solution.

Figure 46. View of street by Mali Graben Canal (Google Street View, 2014).

Figure 47 shows the acceptability of the respondents to flood events in a period of 50 years and as it may be reasonable, most of them think that floods never have to occur in residential areas, however this is not only an issue of human desire, there are some other factors which influence in order that these kind of events occur and which can actually result in natural disasters. Nonetheless, as it is mentioned previously many of the so-called natural disasters are mostly because of human mistakes, due to properties have been built in areas which probably were prone to floods even before the buildings were constructed, but maybe constructors did not know anything about this fact, or there is also the chance that these properties are now in a flood prone areas due to infrastructure that was built after properties were built and it could actually create new flood prone areas, on the other hand, there is also the possibility that authorities of the different levels had previous knowledge about flood prone areas and they just allowed constructors to build properties where there should not be, as it was the case of Acapulco, Guerrero, just because political interests.

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4%

1% 5% Never Once

25%

Twice Three times

65%

Other

Figure 47. How many times in 50 years, in your opinion, are floods "acceptable" to occur on residential areas?

In Figure 48 can be seen that most of the respondents (55%) think that all the real estate sector should be secured at the same level, however there are some countries where it is not like that, since there are some properties which are required to get insurance and furthermore they have to be build according to different specifications already established by the State, it is the case of United States, where there is the NFIP which actually shows effectiveness at internalizing flood risk into the residential property market (Meldrum, 2015). However this situation has not occurred for the City of Ljubljana where it is shown that property values of the buildings inside actual flood extents tend to be cheaper than the ones outside, and for other case it cannot be even described due to the missing information regarding to the real estate market as it is the case for Acapulco, Guerrero, Mexico.

45%

Yes 55%

No

Figure 48. In your opinion, should all the real estate be secured at same level?

Nonetheless, even when there are some case studies where there is an apparently internalizing of flood risk into residential property market, it is not always true, being that property values is not the only indicator which has to be considered, and an example was the case of Boulder, Colorado where property values were not apparently affected by floods, however the number of made contracts dropped down 52% after flood events in September 2013. Figure 49 shows how many years in advance respondents are willing to consider when planning flood management, and slightly more than 50% said that planning flood management has to consider at least 50 years in advance, more than a quarter percent said

68

Flood Impacts on Property Values and Proposals of Measures to Enhance Flood Safety that around 20 years and the quarter per cent left answered than 10 or even less is enough when is planned a flood management and only 1% said that 100 years in advance would be the right period of time to plan flooding management in residential areas, what these results actually mean, at least for above half of the respondents, is that they will to be ready for these kind of events. 1%

4%

16%

5 yr 10 yr 20 yr

51% 28%

50 yr 100 yr

Figure 49. How many years in advance do you think we should consider when planning flood management in residential areas?

What the Figure 50 shows is who are responsible for the reduction of flood risk according to the respondents, and most of them think that the State/Government (77%) has to be in charge for the reduction of flood risk, fact which actually makes sense since flood control as it is mentioned in the literature review is public good even when it is suggested as an impure public good how it is described by Agthe, Billings and Ince or less pure as Rogers, et al. (2008) said, then regional communities (31%) and local authorities (22%), which are also in charge of public goods, come out and finally property owners (9%), anybody thinks that is no one’s responsibility, hence they actually believe that mitigations have to be taken to reduce flood risk. 90% 80%

77%

70% 60% 50% 40%

31%

30%

22%

20% 9%

10%

0%

0% State/Government

Regional communities

Local Authorities

Property owners

Nobody

Figure 50. Who do you think is responsible for the reduction of flood risk?

Finally for this section another figure (Figure 51) taken from Shaw (2005) and adapted with the objective of discussing a few aspects. Firstly if party 1 (A) decides to purchase flood

69

Flood Impacts on Property Values and Proposals of Measures to Enhance Flood Safety control, any party can be interpreted as a community taking into account that flood is a public good, then this party seeks the amount up to M, point where could get certain flood control, however there is the possibility that free riders get also protection at the same level, but if this party 2 (C) decides after party 1 to purchase flood control they could actually get protection up to level N, all will depend of who bids first into the market to obtain some desire level. Nonetheless, the optimal market amount would be where MC curve intersects the market curve (EDF), just between N and B. However, as Agthe, et al. (2000) said, to make this possible is needed to prescribe a mix of responsibility on the part of private and government agents which can actually be really a challenge. On the other hand, there has been a little adaptation to the figure showed by Shaw (2005), being that flood control can also bring negative impacts at level H to other parties (G), when the mitigation measures which are taken for the party 1 have a negative impact in the flood conditions of communities either upstream or downstream, and that is why the best scenario would be when there is a mix of responsibility and it is prescribed by the agreement of all the stakeholders.

Figure 51. Provision of Flood Control (Q), a public good (Shaw, 2005, modified by the author).

5.3.5 Theoretical Profiles of the Positive Economic Impact due to the Implementation of Mitigation Measures in Ljubljana, Slovenia. Figure 52 shows the mean property value of the city of Ljubljana sorted by year and also the trend line which is estimated with an increase of 10.6% over the linear function, percentage which means the mean difference between property values inside the floodplain and outside the floodplain; besides the following figure shows an increase of 8.25% following the case study of Boulder, Colorado where properties in the floodplain (mostly with riverfront) are in average more expensive than the ones outside the floodplain.

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Thousands

Mean Property Value (EUR)

Flood Impacts on Property Values and Proposals of Measures to Enhance Flood Safety 450 400 350 300 250

y = 3804.5x2 - 47684x + 392547 R² = 0.947

200 2008&2009

2010

2011

2012

2013

2014

Year Floodplain

Polynomial Function + 10.6%

+8.25 %

Poly. (Floodplain )

Figure 52. Actual mean property value; estimate values taking into account an increase of 10.6% (mean difference between floodplain and outsidefloodplain values) and estimated values (+8.25%) considering that properties with riverfront would be more expensive than outside the floodplain as it is the case of Boulder, Colorado.

Thousands

Total valus of sales (EUR)

If would be the case of having property values higher inside the floodplain than at least at the same level of outside the floodplain or even more expensive as it is the case of Boulder, Colorado due to the riverfront and/or flood control benefits, then the following Figure 53 shows the amount of money which could be reach every year by the real estate sector. 45000 40000 35000 30000 25000 20000

y = 899894x2 - 9E+06x + 4E+07 R² = 0.8989

15000 2008&2009

2010

2011

2012

2013

2014

Year Actual Value

Polynomial Function (10.6%)

+8.25 %

Poly. (Actual Value)

Figure 53. Total actual value of the sales (2008-2014) of properties inside the floodplain; then there is theoretical total value of the sales following a polynomial function which is at the same level than the total value of sales outside the floodplain, 10.6% average higher; and theoretical total value if properties would be in the same percentage more expensive (8.25%) as they are in Boulder, Colorado, United States.

According to some reports the estimate property damage for Ljubljana, Slovenia in 2010 71

Flood Impacts on Property Values and Proposals of Measures to Enhance Flood Safety which was estimate is of around EUR €15 million, which means that if properties inside the floodplain would have had at least the same price than outside as the polynomial function shows in the figure above, this amount of money could have been covered twice, just in the period that data has been analyzed, since the total difference between the polynomial function and the actual value is around EUR €34 million. Furthermore if short-term measures would have developed it would have cost around EUR €50 million according with the estimations reported by Brilly (2014), amount which could have been reached if the total of property sales would have been at least at the same level in percentage as it is for Boulder, Colorado, where property values inside the floodplain are 8.25% (in average) more expensive than outside, only for the analyzed period of this research (2008-2014), because the amount of money which could have reached would be around EUR €50 million. Nonetheless, medium-term and long-term measures would cost around EUR €3 billion, reason why it is important to highlight that at least with the real estate sector participation some measures could be covered.

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Chapter 6.

Conclusions and Recommendations

This chapter presents the final conclusions and recommendations of this master research. As it is mentioned in the first chapter floods can result in natural disasters and since world population increases, a greater percentage of a country’s land area is taken up with increased urban development and increase in infrastructure requirements (United Nations, 2011). The average annual economic cost of natural disasters as recently as the 1950s was only US $3.9 billion, but these costs have been increased since the 1950s. Since 1970, there have been 14 years where the average annual economic cost of natural disasters has exceeded US $50 billion (Reibeek, 2005) and floods have been one of the natural disasters which have result on loss of value of residential properties according to most of the studies carried out by different researchers, Bell (1999), Donnelly (1988), Skrantz and Strickland (1987) in the United States; Chou and Shih (2001) in Taiwan; Fibbens (1992), Lambley and Cordery (1991) and Eves (2002, 2004a, b, 2012) in Sydney region. Real estate value evaluation is complex and related to the real estate market development, taxation, culture, development etc. and the fact that three different cases were taken into account in this research shows that there are many challenges which have to be carried out when the main objective of the research is to know what the relationship between flood events and real estate market is; firstly because the availability of data varied widely according to the different case studies. For instance, for Boulder and Ljubljana case studies, data were easily available, but, on the other hand for the case study of Acapulco, there were not enough available data, hence a complete analysis could not be done, nonetheless it is important to take into account these case studies to highlight the importance of registering properly data where actually most of the natural disasters can occur and where flood events may have an important impact on property values, hence a call is made to all the stakeholders which can be affected by the impact of floods on property values, furthermore that many fatalities can actually be prevented if proper information is developed by the stakeholder and an adequate flood control is implemented. In this research there are shown three different scenarios, the first where floods apparently do not have an impact on property values, being that before, during and after actual flood event property values followed a constant trend, where on average property values were higher in the floodplain than outside the floodplain as it was the case of Boulder, Colorado, where properties inside the floodplain are 8.25% higher than outside, and it can be due to the internalization of these kind of events on the real estate market as result of the previous mitigation measures which have been taken in this area. However, when a more detailed analysis was made it was found that floods actually impact real estate market being that there was a large decrease (52%) of sales the year after the flood event occurred and this actually affected not only the number of sales inside the area which was flooded, it had an impact on the sales made in the whole community of Bolder Colorado. On the other hand, there is the case study of Acapulco, Guerrero where a similar analysis was not possible since data were not enough to get some conclusion, however floods in September 2013 were declared as natural disaster since there was a large number of fatalities and the economic damage was even larger than the other two case studies analyzed. Regarding the last case study that was analyzed, which is Ljubljana, Slovenia, the number of sales was not impacted as it happened in Boulder; an impact on property values in general was not detected either, 73

Flood Impacts on Property Values and Proposals of Measures to Enhance Flood Safety however property values outside the floodplain are constantly in average 10.6% higher than inside, so it actually means that floods do have a constant impact on the real estate sector. Besides with regard to the questionnaires made in Ljubljana respondents under estimate the price of their properties in flood-prone areas almost twice the actual mean value, fact that actually shows that they perceive that flood have an impact on property value. Hence, the direct damage on the real estate is not only damage cost, there are is lower value as indirect cost for owner and lower taxes for government. Regarding flood control measures, there are some suggestions which were presented in the previous chapter, and actually some of them have been already implemented or are in process, and other ones still have to be made and/or even suggested. The case study where there are several projects going-on is Boulder, Colorado, where there have been done structural mitigation measures which were already briefly presented in the previous chapter, furthermore there are also some non-structural mitigations as the NFIP and also some community organizations, like Long Term Flood Recovery Group, which looks for enhancing flood safety. In the case of Acapulco, Guerrero, it can be said that flood control is really poorly implemented and there is still a lot to do to prevent the impact of floods on property values and loss of life as well. For the case study of Ljubljana this research focused mainly in the mitigation measures proposed by the civil organization which has been established since 2014 and which looks for the collaboration of different stakeholders, being that flood hazard has strong impact and lower real estate value and for this case study real estate owners are highly motivated as stakeholders. Highlighting the importance of social participation, Grothmann and Resusswing (2006) in Birkholz, et al. (2014), argue that private precautionary actions were some of the most effective measures for reducing actual monetary damage in the event of a flood, and that understanding the perceptual process that motivate such responses could therefore be useful in finding ways to encourage such actions. This study also shows how individual’s choices to adopt protective measures are linked not to their perceptions of the hazard, but also to their perception of the role of public authorities. A similar study of Dutch households found that respondents considered the government to have primary responsibility for protection against flood damage, which helped to explain low motivation towards adopting individual protective measures (Terpstra & Gutteling, 2008), as it was the case of the respondents in the case study of Ljubljana, Slovenia when questionnaires were made to households. Retaking what Agthe, et al., (2000) said, it is important to highlight that to get the most optimal economic benefits to enhance flood safety it is need a mix of responsibilities of all the stakeholders on the part of private and government agents which can certainly be really a challenge but actually possible as long as there is the availability from all the stakeholders to participate. This research has shown that floods have an impact on real estate market but on the other hand there can be benefits if flood control is implemented, being that householder and also different institutions can be benefited once flood events are internalized in the market as it was explained with the theoretical profiles suggested by Tobin and Montz (1994). As final recommendations it is important to continue with future researches for any case study but even more relevant where floods can actually become natural disaster, enhancing flood safety to prevent negative impacts on the real estate market and fatalities.

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Appendixes This section shows some complementary material which was taken into account for this research.

Appendix 1 Letter and questionnaire which were sent to 180 members of the Civilna iniciativa za poplavno varnost jugozahodnega dela Ljubljane.

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81


82

Flood Impacts on Property Values and Proposals of Measures to Enhance Flood Safety Translation of the questionnaire 1. When your property was built (year)?

2. Do you know what a flood hazard map is? o o o

Yes I am not sure No 3. Is your property located in a flood prone area?

a. b. c.

Yes I am not sure No 4. Has your property been flooded? If so, how many times?

a. b. c.

Yes No Times: 5. Has your property suffered some damage due to flooding? If so, how much was it (EUR)?

a. b. c.

Yes No Cost: 6. Is your property secured by a package which also covers flood damage?

a. b.

Yes No 7. Have you observed any increase in insurance costs after flood events?

a. b. c.

Yes I am not sure No 8. By what percentage do you think is the value of the house placed in a flood prone area lower than the value of houses in non-flood prone area?

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9. By what percentage do you think the value of the house adjacent by the river is higher than the houses which are not in such an area?

10. Have you implemented any mitigation measure due to flooding (raised floors, cleaned ditches and canals near the property, talk with competent on measures to reduce flood risks, make a plan of action in case of floods ...), and if so, how much has it cost? a. b. c.

Yes No Other: 11. What steps would you suggest should be done in the future to reduce flood risk?

a. b. c. d. e.

The increase flood embankments Deepening the river bed Move away buildings from areas at flood risk Increasing areas for flood mitigation (e. Reservoir) Early warning systems and improve evacuation plans in case of floods

f. g. h. i.

Adapting Buildings Restriction of new construction and renovations in the area at flood risk Nothing Other: 12. How many times in 50 years, in your opinion, are floods "acceptable" to occur in residential areas?

a. b. c.

Never Once Twice

d. e.

Three times Other: 13. In your opinion, should all the real estate be secured at same level?

a. b.

Yes No 14. How many years in advance do you think we should consider when planning 84

Flood Impacts on Property Values and Proposals of Measures to Enhance Flood Safety flood management in residential areas? a. b. c. d. e.

5 10 20 50 Other: 15. Who do you think is responsible for the reduction of flood risk?

a. b.

State / Government Regional community

c. d. e.

Local communities Property owners Nobody

85