In Flood-Prone Red Hook, Property Owners Suspect Resilience Tax Credits May Be a Cop-out

As climate disasters intensify, small businesses in Brooklyn want the federal government to stop passing the buck.

By Stephen Wentzell

12/29/2024

Lehigh Valley Railroad Barge Number 79 Waterfront Museum in Red Hook. (Jim Henderson)

When Hurricane Sandy struck the East Coast in 2012, Susan Povich, the owner of the Red Hook Lobster Pound restaurant in Red Hook, Brooklyn, found her business utterly devastated by the storm. Floodwaters as high as five feet ripped through the floors, walls, and kitchen equipment in the restaurant. The unforgiving aftermath left Povich thinking she would never reopen her business. Povich had lived in Red Hook for 15 years, but had never seen anything like Sandy.

“We had to rebuild the whole restaurant,” Povich said. “We had to tear down all the walls. We had to trash the equipment. We had hundreds of thousands of dollars of damage, and we rebuilt like everybody else.”

As the number and intensity of storms and severe flood events increase, business owners in New York are increasingly dealing with expensive property repairs. Now, lawmakers are considering legislation that would provide tax relief to homeowners and business owners who either invest in proactively preparing for climate disruptions or who have to spend money to repair and rebuild after a severe weather event. The amounts are not large — up to $2,500 — when the cost of climate mitigation and recovery can easily reach into the tens or hundreds of thousands of dollars. While affected people like Povich say every little bit helps, she and others in Red Hook — where 99 per cent of properties will be at risk of flooding in just 30 years – question whether these apparent incentives are actually a way for government to pass the buck onto individuals, rather than investing federal funds into infrastructure improvements to mitigate climate disasters.

“The thing about tax credits is that they encourage a household level of action, and it’s only for people who are able to afford the action rate,” said Zoe Middleton, associate director of the Just Climate Resilience for Climate & Energy program at the Union of Concerned Scientists. “So in general, tax credits are a necessary but insufficient approach to climate resilience, and we need to see more direct spending to help and make sure that everyone is able to weather various storms.”

The 2024 Democratic National Committee’s presidential platform calls for a bipartisan “disaster resilience tax credit.”  No details are provided for the tax credit, and the DNC did not immediately respond to questions about it or which Republicans would support the legislation. However, the plan sounds a lot like the Shelter Act, a bipartisan bill introduced by Sen. Michael Bennet in 2023 that would enable low-income property owners to write off up to $2,500 per year to pay for climate resilience expenses “from strengthening the durability of a roof to elevating a housing unit to reduce potential flood damage.”

Property owners need larger checks, and faster

Bill Nechamen is a retired floodplain expert, having worked for the state of New York and on the National Association of State Floodplain Managers. He explained that regular homeowners’ insurance does not cover flood damage, adding that 50% of businesses that get flooded never reopen. While the National Flood Insurance Program exists, Nechamen noted the premiums can price out those who are most at risk of climate disaster.

Nechamen pointed out that federal emergency funding can take months, which leaves low-income homeowners and business owners in a difficult position to rebuild after a disaster. Nechamen also noted that projects like lifting structures can cost between $150,000 and $200,000, a process that a tax credit like the Shelter Act would barely scratch the surface of.

“A tax credit for mitigation or for recovery would certainly be helpful, but if it’s done, it needs to be managed in a way that people can understand it,” he said. “A community is much better off if the system helps people recover quickly after a disaster.”

Aniket Mehrotra, a policy assistant in the Housing Finance Policy Center at the Urban Institute, published a report in July looking at the state of homeowner’s insurance in the face of greater climate disaster risk.

Mehrotra noted that flood insurance premiums have risen dramatically in recent years as a result of a heightened climate risk, jeopardizing the ability to sustain homeownership in the face of a climate disaster.

“If climate disasters occur, like we’re seeing in [Hurricanes] Helene and Milton, this can lead to significant loss of homeownership and loss of property and loss of wealth, and that’s what we are concerned with,” he said.

While his report didn’t touch on disaster resilience tax credits, Mehrotra believes they can be another resource to help low-income homeowners and business owners with the overwhelming costs of disaster recovery.

“Post-disaster recovery funds in their current state are quite limited, so any solutions that can ensure that greater amounts of funding can be channeled to states and localities to promote recovery and ensure resilience is at least something that should be considered,” he said.

 Taking a neighborhood and helping everybody go through the process together is probably going to have a lot more success, because everybody can lean on each other, and it’s not just some self-selecting process where you’re going to get pockets of good and bad, and that impacts everybody.

—Carly Baker-Rice, head of communications and membership at the Red Hook Business Alliance.

A community based approach might work better

In the next 30 years, flood prone Red Hook will face a major risk of flooding from rising ocean levels due to melting ice at the poles and torrential rains – both caused by climate change. These severe weather events are made worse by a degraded sewer system that can’t handle significant rainfall.

For Middleton, the lack of financial support for home and business owners only makes the next inevitable disaster “that much more damaging,” both economically and on a psychological front.

Middleton’s work has also focused on the policy of equitable allocation of local and federal infrastructure funding. She believes disaster preparedness needs to be more flexible and responsible at the federal level, pointing out that recovery inherently looks different depending on the geography of the region.

“We need massive federal investment to realize any of the planning work that’s been done,” Middleton said, noting that cities alone don’t have the revenue to enact these plans on their own.

Carly Baker-Rice agrees. She is the head of communications and membership at the Red Hook Business Alliance.

Baker-Rice believes the only way for federal climate resilience initiatives to be effective is through an integrated, community-based approach, rather than one that puts the onus on individuals to opt-in to them.

“Taking a neighborhood and helping everybody go through the process together is probably going to have a lot more success, because everybody can lean on each other, and it’s not just some self-selecting process where you’re going to get pockets of good and bad, and that impacts everybody,” she said.

Meanwhile, as Povich continues trying to make her restaurant more flood resistant, she remains unsure whether the federal government will do what it takes to save her business — and her community.

“The only way I see Red Hook being protected is by trillion-dollar floodgates out in New York Harbor, a new sewer system and raising up buildings,” Povich said of her hopes for federal infrastructure investments. “It just all seems so overwhelming, which is why I don’t think we as a human race have been able to make a lot of progress against climate.”