In the US, flooding is a costly and dangerous natural disaster. The Federal Emergency Management Agency has encouraged home builders to construct flood-prone areas for many years by providing flood insurance at a discount.
Furthermore, the agency’s flood maps are infamously out of date. As a result, homeowners are now in a risky scenario as they deal with crippling floods year after year.
The Environmental Defense Fund and the Federal Reserve are only two of the groups that produced the analysis, which found that residences in flood zones are overvalued by as much as $237 billion.
The researchers discovered that homeowners in jurisdictions with insufficient or nonexistent flood disclosure rules, such as Florida, where there are no disclosure requirements and homes are $50 billion overvalued, and coastal property owners were more susceptible to overvaluation.
They also discovered that many of the overvalued residences are located in locations that FEMA claims do not now pose a major danger of flooding, indicating the need for updated flood maps.
The authors of the report told Grist that regardless of whether a homeowner’s house is situated in one of the agency’s special flood hazard areas, where flood insurance is required for the majority of mortgages, states must assess and clearly explain flood risk to homeowners.
The study found that low-income homeowners could lose up to 10% of their market value in the upcoming years, which would be a blow to those who are least able to withstand it.
According to Jesse Gourevitch, a fellow at the Environmental Defense Fund and a co-author of the report, lower-income households are more vulnerable to the danger of price deflation in the housing market. These households might be at risk of losing their home equity if the bubble bursts.
The effects of climate-driven flood danger affect bigger communities as well as individual houses. The analysis demonstrated that if the true worth of homes in flood zones were taken into account and property tax revenues decreased as a result, cities in northern New England, eastern Tennessee, central Texas, Wisconsin, Idaho, Montana, and many coastal locations might see their budgets shrink.
According to Gourevitch, a lot of local governments rely largely on property tax revenue to cover their overall budget. There is a possibility that the assessed value of properties could decrease in regions with disproportionately high flood risk and where flood risk is not effectively factored into property valuation.
Some states now have legislation requiring sellers to inform buyers of the potential of flooding, which is an effective defense against the overvaluation the report describes. The North Carolina Real Estate Commission granted approval this week to a petition that would have given homeowners the right to flood risk information.
But twenty-one states, including Georgia and New York, still keep homebuyers in the dark. In those states, enacting disclosure regulations may assist reduce the financial risk of flooding in the future.
According to Gourevitch, the study presents several ethical issues for decision-makers on who will be responsible for paying for these climatic impacts. Legislators at the state and federal levels may soon have to decide if overvaluation is a problem for individuals or if the government should bail out the people.
A global media collaboration called Covering Climate Now, which aims to increase coverage of the climate topic, includes Gristand. This article first appeared there.