Floods Come at a Higher Price

The cost of buying out U.S. homeowners will only increase with more big storms

By Brenna Holland

12/29/2021

When the remnants of Hurricane Ida tore through New Jersey in September, 30 people died and the storm caused property damage not seen in the region since Hurricane Sandy in 2012.

Ida was the third monster storm to ravage the state over the last two decades. New Jersey—a topographically diverse expanse flanked by swamps, rivers and coastline—has seen as many major floods in the first 21 years of this century as it did in all of the last one.

For homeowners living in repeatedly flooded areas—such as those along waterfronts in Atlantic City, Toms River and Hoboken—the aftermath of a storm like Ida presents a choice: rebuild or leave. 

“Most of the money that is made available for rebuilds and buyouts comes in the wake of a major disaster, which is why it’s historically been a time of decision-making for homeowners,” said Anna Weber, a Natural Resources Defense Council policy analyst. 

Those who choose to leave often find themselves waiting years for government buyout programs. Because their homes are unfit to live in because of mold, sewage, leaks and other problems, owners often must fix their structure or relocate at their own expense while waiting for relief.

Flooded roads in New Brunswick, New Jersey, following Hurricane Ida. (Brenna Holland)

Given how climate change has increased the frequency of monster storms, a homeowner who does repairs before a buyout date may have to do so more than once. 

After catastrophic floods decimated Charleston, South Carolina in 2015, residents across the city applied for Federal Emergency Management Agency buyouts. It would be four years before homeowners finally got through the process and, in that time, four additional major flooding events had hit in their neighborhoods. 

“Buyouts live at the intersection of disaster relief and housing, which are two of the most inequitable systems we have in the U.S.,” said Weber, o-author of a 2019 report that analyzed 30 years of property buyout data from FEMA.  “So, when we look at these two worlds colliding in the federal buyback program, we see the worst aspects of each system at play.”

A twist in how buyouts work

From 1989 to 2017, FEMA financed more than 43,000 buyouts. In these transactions, homeowners in flood-prone states including Louisiana, Florida and New Jersey were offered the pre-disaster value of their home, in return for relocating to safer ground. 

Once the home is purchased by the federal government, a process of restoration begins. Structures are torn down, the hole in the ground where the foundation once took root is filled and the lot is returned to its pre-development landscape. If the home was built on grassland, grass seeds and trees will be planted; if the home was built on a beach, sand will be poured and it will rejoin the shoreline. 

The plot of land will not be available for purchase by developers or individuals looking to build a home. Instead, the renewed natural landscape may even act as an absorbent barrier that can help mitigate flooding of neighboring structures. 

To qualify for a buyout, homeowners must demonstrate that their home is a “repetitive loss property,” meaning the property has filed at least two flood claims where the repairs equaled or exceeded a quarter of the home’s market value. Applicants can also qualify if they prove their home is a “severe repetitive loss,” meaning it has a flood history of four or more separate claims of $5,000 or more each.

It is estimated that FEMA spent over $2 billion on buybacks between 1993 and 2011 alone, with the median amount paid to each homeowner $54,000. In a buyout, FEMA provides three quarters of the funding that goes to homeowners and state and local governments cover the balance. In the end, homeowners receive the entirety of their home’s original value.

Weber discovered that the most common type of home bought out were thoses with the lowest value within the wealthiest neighborhoods inside repeat flood zones. 

Wealthy neighborhoods across the country are more successful in their efforts to garner FEMA’s attention after a disaster, Weber found. But once FEMA is enlisted and the agency enters a neighborhood, its mission becomes buying back the largest number of homes while spending the least amount of money. Therefore, FEMA’s portfolio of buyouts is littered with low-value structures in rich towns. 

“If your home is repeatedly flooded and you want a buyout, you can’t just call FEMA and ask for one,” Weber said. “You have to go through your local government, who goes through your state government, who goes through the FEMA application process. Then the funding for the buyout has to flow backwards down that line to the individual households.”

The added cost of waiting

Wait times are the central driver of inequity within the national buyback system, she said. For a host of reasons—including mold, electrical hazards and unstable infrastructure—recently flooded homes are not safe to live in. This means homeowners who want a buyout need to use their own money to relocate for the duration of the wait time.

Many homeowners who make it through the buyout process rent apartments for several years while they continue paying taxes and mortgages on damaged homes. Others are lucky enough to have relatives who can accommodate them—and luckier still if they don’t have to uproot children from their local school systems and social networks. 

The other option homeowners have is to make repairs to the damaged home so that it is livable until the date of the buyout. This option is less than desirable though, as repairs made to the home during the wait time will not increase the amount FEMA will pay for a house. 

“That is just money a homeowner will never see again,” Weber said. 

Property buyback programs can play a central role in managed retreat—the coordinated process of moving homes and infrastructure away from areas at high risk of floods, wildfires and other environmental hazards. That’s why advocates have proposed a more streamlined buyback program that collapses state and local government intermediaries and reduces wait times. 

“We already have an example of something like this and it’s called the National Flood Insurance Program, where funds flow directly from the federal government to homeowners,” Weber said. 

In lieu of a straightforward federal buyback system, New Jersey has established a  first-of-its-kind program to supplement FEMA efforts. As of February, the Blue Acres program had spent $200 million buying back more than 1,000 properties in repeat flood zones. 

After Ida prompted an influx of buyback applications, state Department of Environmental Protection Commissioner Shawn LaTourette said the program “definitely needs expansion.” 

Widening the program in New Jersey and beyond depends on federal funding and public will.