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• The cost of flood insurance is currently burdensome for about one-quarter of households in owner-occupied one- to four-family residences in the study area and is much more burdensome for lower-income residents.
• Removing grandfathering — the ability to base premiums on previous flood zones and elevations when flood maps are updated — dramatically increases premiums for all one- to four-family properties when maps are revised to reflect increasing risk.
• Such premium increases are projected to reduce property values and property tax revenue from what they would have been had premiums not increased; conversely, premium increases are projected to increase loan defaults and the percentage of households for which flood insurance is burdensome from what they would have been otherwise.
• There are promising financial-assistance options that use means-tested eligibility criteria rather than general subsidies.
• Grants and low-interest loans are not particularly attractive given the current rate structure and flood maps but become much more attractive when maps are revised to reflect increasing risk and when pre-FIRM rates and grandfathering are eliminated.
• Government costs can be significantly lower with an option that combines an income-based subsidy with mitigation, but only under certain conditions.

This report examines the cost of flood insurance in New York City and the ability of homeowners to afford it. It develops projections for how changes in flood maps and the pricing practices of the National Flood Insurance Program might increase premiums and analyzes the potential consequences of those increases on households and communities. It also develops and evaluates several different approaches for assisting households that have difficulty affording flood insurance. These include financial payments to households to offset the cost of flood insurance as well as mitigation grants and loans that reduce flood insurance premiums by making the home less susceptible to flood risk. This report builds on a previous work by the RAND Corporation on flood insurance in New York City, Flood Insurance in New York City Following Hurricane Sandy.

In addition to informing New York City's efforts to make its communities more resilient to flood risk, this work is also relevant at the national level. Congress instructed the Federal Emergency Management Agency (FEMA) to develop an affordability framework in light of legislation that directs FEMA to gradually eliminate certain program subsidies and to collect additional program fees. This report provides data and analysis that also inform that effort.

• Chapter One

  Introduction

• Chapter Two

  The Affordability of Flood Insurance in New York City

• Chapter Three

  Flood Insurance Premium Scenarios

• Chapter Four

  Flood Insurance Affordability in Five Vulnerable Subareas

• Chapter Five

  Effects of Flood Insurance Premium Increases on Households and Neighborhoods

• Chapter Six

  Flood Insurance Affordability Program Options

• Chapter Seven

  Conclusion

• Appendix A

  Survey Methods

• Appendix B

  Development of the Project Geodatabase

• Appendix C

  AMI-Based Income Categories and the Correlation Between Household Income and Net Worth

• Appendix D

  Components of Housing Costs and Relationship Between Amount of Flood Coverage, Structure Replacement Cost, and Mortgage Balance

• Appendix E

  Flood Insurance Premium Model

• Appendix F

  Eligibility Requirements for Pre-FIRM and Grandfathered Rates

• Appendix G

  Economic Effects Model

• Appendix H

  Survey Instrument