Italian households’ wealth is significantly influenced by real estate holdings, with a high homeownership rate of 75.2% making the housing market a crucial component of household wealth. However, this wealth is increasingly vulnerable to extreme weather events, particularly floods and landslides, which threaten property values.

Italy’s unique geographical context exacerbates these risks, with roughly a quarter of the country’s housing stock located in flood-prone areas. This study investigates how floods impact house prices across different Italian municipalities, focusing on property types, conservation status, and municipal characteristics.

Using a staggered two-way fixed effects difference-in-differences (TWFE DiD) model, we examine the impact of floods specifically on municipalities that are not metropolitan centers or provincial/regional capitals. Our findings indicate a persistent negative effect on housing values in affected areas, with maximum sale prices per square meter declining by 1.6% to 3.2%.

Notably, properties in semi-central zones experience sharper declines, particularly among affordable housing units. These insights are essential for policymakers and stakeholders in light of the increasing frequency and intensity of extreme weather events related to climate change.