Poster Paper:
The Socioeconomic Effects of Flood Insurance Reform: The Case of New Jersey
Friday, April 6, 2018
Mary Graydon Center - Room 2-5 (American University)
*Names in bold indicate Presenter
This research seeks to identify the socioeconomic effects of flood insurance reform on the real estate market, and specifically, the residential home foreclosure rate, in all floodplain communities (i.e., cities, towns) throughout New Jersey. No less than several months before Superstorm Sandy pummeled through the 600-mile stretch of the New Jersey coastline on October 29th, 2012, Congress passed the most controversial reform of the National Flood Insurance Program (NFIP) [Rebecca Elliott, 2017]. The Biggert-Waters Flood Insurance Reform Act attempted to restore financial solvency to the NFIP by eliminating problematic provisions that have massively indebted it since Hurricane Katrina (Carolyn Kousky and Erwann Michel-Kerjan, 2015). When Biggert-Waters was enacted and took effect at the beginning of 2013, problematic provisions, such as grandfathered and subsidized premium rates, which have allowed flood insurance to remain affordable for low-income households across all flood zones, were dissolved and replaced with rates that reflected a homeowner’s actuarial flood risk as determined by the Federal Emergency Management Agency (FEMA) [Earthea Nance, 2015]. When Biggert-Waters was repealed in 2014, these provisions were restored and the previous, subsidized premium rates, reinstated (Jason Sugarman, 2017). Why New Jersey proves to be an interesting context for research on flood insurance reform stems from the fact that the repeal of Biggert-Waters grew specifically out of the aftermath of Sandy, as floodplain New Jersey homeowners experienced the new, actuarial premium rates, which increased exponentially in certain cases, on top of various costs associated with the devastation resulting from Sandy (Alexander Lemann, 2015). Utilizing population and housing estimates from the American Community Survey, real estate market and foreclosure data from RealtyTrac, in conjunction with NFIP policy and claims data, this research follows a quasi-experimental design to evaluate the significance of the actuarial flood insurance premium rates, before and after the repeal of Biggert-Waters, on real estate markets and home foreclosure rates throughout all New Jersey floodplain communities. This research examines the relative and comparative impact that premium rates after the enactment of Biggert-Waters and after its repeal, between the years 2012 and 2015, had on real estate markets and the likelihood of New Jersey homeowners to foreclose in 100-year and 500-year floodplain communities, as well as Special Flood Hazard Areas in the state. Since no prior research has attempted to evaluate the implications of the enactment and repeal of this reform on New Jersey, this research uniquely assesses how pending flood insurance reform must address future, reoccurring natural disasters similar to Sandy and the implications that premium rates can have as geographically and socioeconomically-vulnerable homeowners recover from such disaster.
