As Flood Plains Expand, Sellers Continue to Hide Risk from Residents

October 20, 2020

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by Amy Lupica (Our Daily Planet) Across the nation, 15 million residences are at high risk of flooding within the next 30 years, and most homeowners and renters aren’t aware of this risk.

Only about half of states require any kind of disclosure when it comes to flood risk and those that do offer information do so in confusing ways.

Flooding is one of the most deadly and destructive natural disasters and as floods and powerful storms increase due to climate change, it’s more important than ever that people understand the potential risks their properties face.

Why This Matters: The remnants of flooding, and the financial or physical inability to repair the damage, can impact people’s health, financial stability, access to education, and access to clean water. The lack of transparency by sellers, landlords, and governments puts lives in jeopardy, and like all impacts of climate change, low-income communities and people of color are especially affected.

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A Government Shortfall: So far 21 states have no law requiring disclosure of flood risk even if the home has flooded in the past. Areas at risk of flooding are growing larger and encompass more urban spaces than before.

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Freddie Mac found that homes outside of official flood plains, which weren’t required to be insured, were more likely to default on mortgages after Hurricane Harvey than homes in the official floodplain.

Currently, residents who learn that their home is in a flood plain after signing a contract are often trapped in expensive, required flood insurance plans.

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For those who rent, existing tenant protection may not cover them.

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Without comprehensive and aggressive action to fight climate change and warming ocean temperatures, no amount of warnings will be able to prevent devastating harm to the growing number of floodplain residents. READ MORE

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Excerpt from Washington Post: As FEMA prepares to remove subsidies from its flood insurance, a new assessment says 8 million homeowners in landlocked states are at risk of serious flooding because of climate change

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On Friday, the Federal Emergency Management Agency will incorporate climate risk into the cost of flood insurance for the first time, dramatically increasing the price for some new home buyers. Next April, most current policyholders will see their premiums go up and continue to rise by 18 percent per year for the next 20 years.

The price hike under a new assessment, Risk Rating 2.0, will more accurately reflect the threat of flooding in a changing climate, federal officials say.

Most homeowners will see modest increases starting at $120 per year in addition to what they already pay, and a few will see their insurance costs decrease. But wealthy customers with high-value homes will see their costs skyrocket by as much as $14,400 for one year. About 3,200 property owners — mostly in Florida, Texas, New Jersey and New York — fall in that category.

Like the climate threat, the cost increase will reach far beyond the coast.

Homeowners in inland states such as Iowa, Missouri and Nebraska, where creeks, streams and rivers overflow during heavy rains, will also see price increases in their government-backed flood insurance.

Climate change will affect people who weren’t threatened before. New technology that allows analysts to study the environs around each home led to a stunning find: 6 million homes in states such as Utah, Idaho, Vermont and Tennessee that didn’t require insurance because they were thought to be safe from flooding are actually at risk because of climate change. READ MORE

Excerpt from Politico Pro Climatewire: The Treasury Department is urging states to force insurance companies to better account for climate change and its financial risks as growing disaster damage is costing insurers billions of dollars in property claims.

The 73-page report, released Tuesday morning (June 27, 2023) by Treasury’s Federal Insurance Office, comes at a tumultuous time for property insurers. Some have gone insolvent or stopped coverage in flood-prone states such as Florida and Louisiana and in states hit by severe wildfires including California and Colorado.

The report, ordered by President Joe Biden in a May 2021 executive order, is likely to serve as a marker of progress by states and a national insurance association in incorporating climate change into insurance industry planning.

The insurance office does not regulate insurers — that’s done by state agencies — and it relies mostly on its power to monitor the insurance industry and issue detailed reports with data and recommendations.

“The idea here is that more robust work by the states, who are primarily responsible for regulation and supervision of insurance companies, will help maintain the solvency of those companies,” Graham Steele, Treasury’s assistant secretary for financial institutions, told reporters Monday. READ MORE

Excerpt from CNBC: “There have been several,” said Shelly Lockwood, a real estate agent on Nantucket. “One sold in the mid 7s, and one sold in the mid 8s, which I know that sounds like a lot of money, but those houses, if they weren’t at erosion risk, would have sold for, I don’t know, 10 or 12 million [dollars].”

Lockwood just launched a seminar for fellow agents to help them reprice homes at risk.

“I think we owe it is a duty to our clients to tell them what the risks are, and I was getting frustrated that that wasn’t being communicated to my satisfaction, because I saw houses selling and I thought that’s not worth that, it’s falling in the ocean,” said Lockwood.

Montauk mess

On the eastern end of Long Island, New York, in Montauk, a series of storms this winter had the community scrambling to bolster its beaches and protect its multimillion-dollar homes. The water was coming in faster than ever before.

“Where we’ve seen flooding in the past and the water subsiding right away, it’s not subsiding anymore,” said Kay Tyler, executive director of Concerned Citizens of Montauk. “We have a friend that has a $10 million home, and he’s not even sure what to do with it because if he sells it it’s never going to be the $10 million he bought it for.”

Looking at ZIP codes just on the East and Gulf coasts of the United States, 33 have a median home value of at least $1 million. In just these areas a combined 77,005 properties are at significant flood risk, according to models by First Street, a climate risk data and analytics firm. That is roughly $100 billion in potential losses. READ MORE