Homeowners in New York City could find flood insurance rates rising due to possible changes in federal flood maps and rate calculations, according to a new study by the Rand Corporation.
Flood insurance is currently difficult to afford for 25 percent of the households in owner-occupied residences in New York City’s flood-prone areas, Rand researchers said in the report, “The Cost and Affordability of Flood Insurance in New York City.”
That percentage is expected to rise to 33 percent if proposed updates to the Flood Insurance Rate Map (FIRM) are adopted, special rates for older homes are eliminated, and grandfathering provisions allowing rates to be based on the old rather than the updated FIRM are dropped.
The primary source of residential flood insurance is the National Flood Insurance Program run by the Federal Emergency Management Agency (FEMA). The FIRM for New York City is being significantly updated by FEMA for the first time since it was adopted in 1983 and adjusts the flood elevations to reflect today’s risks.
The portion of people purchasing flood-insurance (the take-up rate) in the study area is about 43 percent, which is higher than when Hurricane Sandy struck in 2012. However, even those property owners with insurance are not fully covered for flood-related losses. Yet as the cost of flood insurance climbs, take-up rates will likely fall.
Congress has asked FEMA to examine options that could help individuals afford risk-based premiums.
Rand developed five different designs for a flood insurance affordability program for New York City, including means-tested financial assistance to households that need it most, as well as grants and low-interest loans to low and middle-income households to make their homes less vulnerable to flood risk and less costly to insure.
“Risk-based premiums provide appropriate incentives for homeowners and property developers to mitigate or avoid risk and provide financial stability for the National Flood Insurance Program,” Lloyd Dixon, lead author of the report and director of the Rand Center for Catastrophic Risk Management and Compensation, said. “The flood insurance affordability programs examined in this study provide means-tested assistance to households that need it rather than continuing with generally subsidized rates.”
The results should help policymakers weigh the advantages and disadvantages of different approaches, and are of particularly relevance as Congress debates reauthorization of the National Flood Insurance Program.
“A key initiative under New York City’s resiliency program is to ensure that residents in the floodplain are prepared for coastal storms and rising seas, which requires that the right tools, like flood insurance, remain available and affordable,” Daniel Zarrilli, senior director of climate policy and programs at the New York City Mayor’s Office, said. “The findings by Rand provide important options for consideration during the National Flood Insurance Program reauthorization in order to better serve our coastal communities as we seek to build a more resilient city.”