Managed retreat: moving 1 million US homes out of flood zone could save $1 trillion dollars

By Will Bugler

A US-government study has found that the country could save $1 trillion dollars by removing around a million homes from flood-prone areas. The report indicates that government schemes to buy and demolish homes at high risk of repeated flooding, moving residents to higher ground, should be expanded. The report notes that climate change will drive flood risk to real estate even higher in the coming decades and warns that without action financial losses will climb substantially.

The report says that buyout programmes are essential to minimise exposure to flood risk. However, existing schemes operated by the Federal Emergency Management Agency (FEMA) are hampered due to funding shortages and the reluctance of homeowners to move.

“Flooding is the country’s biggest risk, and we just have all of these homes in the floodplain that keep getting repetitive losses,” said Keith Porter, one of the study’s authors and a structural engineering researcher at the University of Colorado. “We never should have been building in the floodplain in the first place. It’s time to solve that problem.”

According to the report, while a nationwide buyout programme would cost around $180 billion, it could save around nine times that amount – $1.6 trillion – over a 100-year period. Savings would accrue thanks to reduced costs to public disaster programmes and avoiding property damage reducing pay-outs through federally subsidised flood insurance schemes.

The report found that moving properties out of the flood zone through a buyout scheme was by far the most cost-effective way to reduce risk, saving $6.50 for every $1 spent. Other flood related protection measures such as levees and home adaptations still represented value, but were much more costly, saving $2 for every $1 spent.

The findings are important, as federal agencies consider the best course of action to reduce climate risks, faced with mounting costs from properties that are flooded repeatedly. FEMA’s National Flood Insurance Program ensures that homeowners that would otherwise be refused flood insurance can continue to insure their properties. However, “repetitive-loss properties” (those that flood repeatedly, year after year) are becoming increasingly burdensome to the programme. The government has resisted cutting funding for the flood insurance programme, as that would increase premium pay-outs considerably, or leave homes uninsurable.