US flood governance fosters social inequality and could lead to the next housing market crash

A recent study published in Communications Earth & Environmental looked at the current U.S. national flood insurance program and how another housing collapse could occur without fundamental changes. I considered it.

The collaboration includes UConn School of Natural Resources and Environment researchers Associate Professor James Knighton, Associate Professor Richard Anyah, master’s student Sandeep Poudel, UConn Associate Extension Educator Zbigniew Grabowski, and Rebecca Elliot of the London School of Economics and Political Science. Included. Knighton, Poudel, and Elliott wrote the following blog post for the Springer Nature Research Community.

The National Flood Insurance Program (NFIP) is a public federal program designed by Congress as a safety net for homeowners exposed to flooding after private insurance companies refused to underwrite the risk. From 1978 to 2004, premiums collected from insured properties fully covered all insurance payments to repair flood damage.

But since 2004, rising sea levels and worsening losses from coastal storms have left the NFIP with tens of billions of dollars in debt to the U.S. Treasury, much of which is regularly repaid by the U.S.’s broad tax base. Ta.

The financial and policy challenges facing NFIP in recent years have led us to wonder what the future holds for the program. Our socio-environmental forecasts, based on climate projections, U.S. Census data, FEMA records, and Zillow home prices, show that a business-as-usual approach to flood mitigation will further increase NFIP debt, culminating in a sudden housing market. It shows that you can reach. Our research is broadly consistent with a 2016 report from Freddie Mac that predicted $160 billion of the housing market would collapse. It will reach high tide by 2050 and reach $238 billion by 2100.

While these predictions may seem far-fetched, there are warning signs that the U.S. coastal housing market will collapse in 2024. Before Hurricane Sandy in 2012, coastal real estate in the northeastern United States was a sound investment, rising in value significantly faster than the national median.

Since Sandy, real estate on the Northeast coast has been less competitive as an investment, with home value growth about 25% below the national median. In the months since Hurricanes Helen and Milton, the United States has paid $480 million to repair 54,000 damaged properties. Despite the structural recovery from the NFIP, market values ​​have not recovered, with listed sales prices down approximately 15% as of this writing.

Our predictions are consistent with what we’re seeing on the ground. Florida is likely to be the canary in the coal mine, indicating that coastal home prices will continue to decline. The Mid-Atlantic and Gulf states are expected to see dramatic declines in home prices starting around 2040.

The Northeast and West Coast of the United States are naturally well protected from severe coastal storms, but sea level rise is avoided and will continue for decades to come. A major part of the coastal housing market that American taxpayers have built through the NFIP will soon be flooded out.

What should we do? Maintaining the NFIP in its current form is probably the least desirable option for the United States. Coastal storms will continue to pose serious risks to the health and safety of people in floodplains and stress emergency response agencies. Taxpayers continue to subsidize coastal real estate development, primarily benefiting the wealthy.

Low-income coastal residents who cannot afford to relocate on their own will see the wealth accumulated in family-owned homes gradually eroded. Wealthier residents living at risk will continue to receive economic benefits from the NFIP until they decide to safely relocate.

Government-supported, community-led relocation of coastal residents from flood-prone areas can solve four problems at once. First, the U.S. could avoid a catastrophic housing market crash. Second, relocation will improve our nation’s resilience to storm surges and coastal storms. Third, it would protect U.S. taxpayers from increased NFIP liability.

Finally, approximately 70% of the land adjacent to the U.S. coastline is privately owned. By converting private coastlines into naturally restored public spaces, we can provide all residents with access to their own natural resources while acting as a buffer from upcoming storms and storm surges.