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Fed Flood Program Has Spent $660M Repeatedly Rebuilding Same NJ Properties

A much-needed reform to nation’s flood insurance would give homeowners the option to be bought out rather than rebuild

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The nation’s flood insurance program has shelled out $660 million to repeatedly repair and rebuild the same 3,246 properties in New Jersey since 1978, according to a new report by the Natural Resources Defense Council.

Across the country, the National Flood Insurance Program (NFIP) has paid out $5 billion to repair and rebuild more than 30,000 “severe repetitive loss properties,’’ analysis of Federal Emergency Management Agency data found.

The report, coming at a time when Congress is preparing to debate the reauthorization of the flood insurance program, recommends lawmakers revamp it to incorporate a series of climate reforms, including providing homeowners with a guaranteed buyout if they no longer want to rebuild.

“Flood insurance traps homeowners in a situation no one wants to be in: forced to rebuild in a location that will inevitably flood again,’’ said Rob Moore, lead author of the report and a senior policy analyst with the NRDC. “It’s time to start helping people move to higher ground, rather than make them wait for the next flood.’’

NJ third for flooding

Not surprisingly, New Jersey ranks third — behind Louisiana and Texas — in the number of severe repetitive properties. Those are property owners that have had four or more flood insurance claim payments of $5,000, with at least two of those within a 10-year period, or two or more payments that together exceeded the value of the property.

The flood insurance program underwrites policies for 230,000 New Jersey homeowners who live in coastal zones or other flood-prone areas, but has come under frequent criticism, particularly over disputed and denied claims in the aftermath of Hurricane Sandy. Nationwide, the program covers about 5.1 million properties.

The nationwide program is deeply in debt, estimated at $24.6 billion, primarily because it pays out more in damages than it collects in insurance premiums from policyholders.

Debt and sea level to climb

The analysis projects the debt will soar as sea level rises due to climate change, repeatedly flooding millions of homes along the coasts and inland waterways. The General Accountability Office (GAO) placed the flood program on its list of programs that pose a “high risk’’ to the nation’s fiscal sustainability.

“New Jersey’s coastal real estate is a ticking time bomb when you consider sea-level rise,’’ said Doug O’Malley, director of Environment New Jersey. “Hurricane Sandy was a wakeup call, but some towns are continuing to rebuild in the flood plain.’’

The current program, according to the report, provides little incentive to encourage homeowners to move to higher ground and instead provides assistance mostly to help people elevate their homes, an approach most commonly used in New Jersey.

The state, however, has used approximately $300 million in federal funds it secured after Sandy to buy out homeowners who choose to move, according to the latest statistics from the New Jersey Department of Environmental Protection.

Cost-effective relocations

The report suggests that a buyout of homes if owners want to relocate would be a more cost-effective approach than paying out claims for flood damage, particularly if properties are worth less than $250,000. While the NFIP has spent $46.6 billion to repair and rebuild homes since 2000, it only has allocated $800 million to purchase flood-prone properties.

To encourage more buyouts, the organization recommended qualifying homeowners be offered a guarantee of a future buyout as a benefit of their flood insurance coverage.

“For homeowners who recognize the need to move to higher ground, the NFIP should enable them to do just that,’’ the report concluded.

Just last week, a bipartisan bill to overhaul the flood insurance program was introduced in Congress by Democratic Reps. Bill Parcells (9th) and Frank Pallone (6th). It is modeled on a bill being sponsored by U.S. Sen. Robert Menendez of New Jersey. Congress needs to reauthorize the program before it expires at the end of September.

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