Episode 50 – Dollar Sale on Flood Damage

A new working paper from the Congressional Budget Office estimates that for every dollar spent to elevate or buy-out a flooded home, $2.69 would be saved in future costs over the next 30 years.  Of the 1.3 million projects the paper identifies, roughly 138,000 would see a greater savings of $6 dollars.  Total savings would amount to $519 billion in future damage if governments and homeowners together would spend $193 billion today.

Former Florida Deputy Insurance Commissioner Lisa Miller sat down with one of the paper’s co-authors and the head of a national home floodproofing solutions company to discuss the government’s current efforts – and what’s lacking – to avoid costly future flood damage across the nation.

Show Notes 

The Congressional Budget Office (CBO) is the research arm of the U.S. Congress, tasked with providing nonpartisan analysis for lawmakers to consider when making policy.  Its May 2024 working paper, Flood Damage Avoided by Potential Spending on Property-Level Adaptations found: 

• There are opportunities for adaptation for approximately 1.3 million projects nationwide (each adapting a single property of one to four units) where the expected avoided damage exceeds project costs primarily from elevating the home above flood stage or a buyout of the property for later destruction.
• The total cost of completing these projects would be $193 billion, preventing $519 billion of expected damage over 30 years.
• On average, each dollar spent on these projects would avoid $2.69 of expected damage.
• About 138,000 projects would result in expected avoided damage over six times the cost of the project.
• Outcomes vary based on area income and geography.

“We started looking into federal spending on adaptation to flood risk and we found that there's a big literature out there, but it can be really difficult to compare across studies, and apply one context to another,” explained paper co-author Evan Herrnstadt.  “So we would need a scalable and flexible approach and found it was feasible for us to use the National Structure Inventory from the U.S. Army Corps of Engineers and flood modeling from the First Street Foundation and combine that with some other work to estimate avoided damage from property level interventions like buyouts and elevations,” said Herrnstadt, who is a CBO economist.  The national framework that CBO developed used inland and coastal residential properties that contain 1 to 4 housing units.

While the CBO doesn’t make policy recommendations to Congress, Herrnstadt said in this report, it does characterize sets of projects and different allocation schemes to provides potential opportunities to avoid flood damage paid principally by federal, state, and local governments, together with homeowners.  The paper notes that FEMA has multiple programs that fund property-level adaptation.  From fiscal years 2008 to 2019, annual obligations for those programs totaled about $280 million, representing an average of 29% of the amount FEMA has obligated for hazard mitigation.

“Evan this is fantastic work,” said Tom Little, President & CEO of Floodproofing.com, an integrated company providing property risk analysis, wet and dry floodproofing solutions, and flood insurance.  “This is the type of information that we need to get out there to continue to build awareness that we can actually invest money and get a strong return on that investment, by retrofitting the existing infrastructure that we have... (For full Show Notes, visit https://lisamillerassociates.com/episode-50-dollar-sale-on-flood-damage/