Floods have a lasting impact on properties even after water levels have lowered.
A recent report shows the startling toll repeated floods and strong storms have taken on home prices in New York, New Jersey, and Connecticut. The study, conducted by nonprofit climate research firm First Street Foundation, estimated that between 2005 and 2017, frequent flooding in coastal communities has eroded property values by $7 billion.
The latest First Street Foundation study follows earlier findings that homes in Florida, Georgia, South Carolina, North Carolina, and Virginia saw their values plummet by $7.4 billion. For all eight states studied, property values have dropped by more than $14 billion. To reach its conclusion, the group compared residential transactions in coastal communities with similar houses in higher elevations.
The two hardest hit states were Florida, with $5.42 billion in lost property values, and New Jersey, with $4.5 billion in losses. Homes in New York saw their values decline by a collective $1.3 billion. Connecticut property values dipped by $916 million.
This study, and a previous one that predicted 311,000 homes valued at $117.5 billion could be overtaken by rising sea levels over the next 30 years, highlight the impact of frequent floods and storms on property values. Such reports also underscore the importance of making coastal communities more resilient to water damage.
Preparing for Floods Now
First Street Foundation researchers found a high concentration of property value reductions in the small New Jersey town of Ocean City, which has 11,000 residents. From 2005 to 2017, homes in Ocean City lost $530 million in potential value. Miami Beach, by contrast saw home values decline by $337 million.
While a spokesperson for Ocean City has disputed the report’s estimates, he did tell the Wall Street Journal that the town has undertaken measures to withstand powerful storms. The local government has constructed sand dunes to shield its waterfront, replenished sand on its beaches, and enacted a law that newly built homes must be elevated. The town also plans to upgrade drainage systems and pumping stations and raise streets with a $100 million capital fund.
NFIP Program Renewed
In early August, the Senate approved a short-term extension of the National Flood Insurance Program (NFIP) until November 30. Although lawmakers sidestepped addressing major changes to the program — like reducing its $20-billion debt — the renewal allows the NFIP to continue to issue policies.
It’s also likely lawmakers didn’t want to let the NFIP lapse just as the Atlantic hurricane season is ramping up. August was a quiet month in terms of storms, but weather forecasters are predicting September is on track to be more active, particularly in the Gulf of Mexico and around the Florida coast.
How Insurance Agents Can Help
Clients who live along coastal areas have likely faced flooding in the past. Regardless, consider taking the time to review their coverage and ensure that they have the protection they need. Even if they have an NFIP policy, it’s important to note that the federal program will only provide up to $250,000 in reimbursements. If your client’s property value exceeds that sum, they’ll need a supplemental private policy.
Further, a recent survey revealed many consumers are unaware of what their insurance policies actually cover. For example, an NFIP contract covers property damage and loss of belongings, but not structures outside the home such as pools and decks. Before your client purchases NFIP coverage, make sure they know the items included — and omitted — from a policy.
Whether they live along the coast or further inland, your clients’ homes are their biggest investment. Help them protect that asset from damage with common-sense policies that cover risks, as well as tips for preparing their homes during storm season.