Flooding in the United States 102: Policy and Solutions

Flooding is the costliest disaster in the United States, with average annual damages of $4 billion. As described in “Flooding in the United States 101: Causes, Trends, and Impacts,” because climate change brings on more intense storms and rising sea levels, flooding will become more frequent and severe.

This explainer discusses solutions for reducing the cost of flood events and accelerating recovery afterward. Specifically, we will discuss how to reduce both flood hazard (the likelihood of a flood) and exposure (population and properties in hazard areas). We will also discuss vulnerability—recognizing that not all people exposed to flooding are affected equally—and explore options to target assistance to communities and people who are most vulnerable.

Community-Level Flood Mitigation Infrastructure

The most common flood mitigation option is community-level defensive infrastructure.

Historically, governments have invested in “gray” infrastructure for flood control. Gray infrastructure includes manmade structures—such as levees, dikes, flood walls, flood control dams and reservoirs, and sea walls—which are intended to block flood waters from reaching the communities behind them. Gray infrastructure also includes stormwater infrastructure designed to control runoff across impervious surfaces, like systems of underground pipes, channels, culverts, and detention basins.

In recent years, engineers and researchers have increasingly recognized the value of “green” infrastructure as an alternative to, or in conjunction with, gray infrastructure. Also referred to as nature-based solutions or natural and nature-based features, green infrastructure includes wetlands, seagrass beds, oyster reefs, riparian buffers, mangroves, and living shorelines. These natural features can absorb storm and tidal waters and also serve as natural buffers for coastal storm surge. In urban areas, there are additional green infrastructure options such as bioswales, permeable pavements, and green roofs which mitigate urban flooding by collecting rainwater and reducing excessive runoff. Green infrastructure can provide important co-benefits beyond flood protection that is typically missing from gray infrastructure. These include a range of ecosystem services such as wildlife habitat, water purification, reduction of urban heat island effects, recreational benefits, and more.

Flood Proofing Buildings and Properties

At the property level, there are various activities that can make structures more resistant to flood damage. For example, buildings can be elevated on stilts or platforms. Property owners can also elevate heating, cooling, and electrical equipment. Waterproofing basements, sealing foundations, and using water-resistant building materials for walls and floors can further mitigate flood damage. It is worth noting, however, that structural changes to floodproof buildings, especially to elevate a home, can be quite expensive.

Ensuring that the drainage system on a property works properly will also help. Property-level green infrastructure such as rain gardens, which help retain water in plant roots and soils, can be a part of those systems.

Policies to Facilitate Flood Mitigation

Individuals and communities often do not adequately invest in hazard mitigation due to reasons such as limited capacity, financial means, and imperfect information. Therefore, government policies and programs are needed to incentivize and encourage the activities described in the section above.

As local governments face technical and funding constraints, large-scale civil works projects such as the construction of sea walls and levees are often led and funded by the US Army Corps of Engineers. There are nearly 23,000 miles of levees in the United States (see Figure 1).

The Federal Emergency Management Agency (FEMA) also plays an important role by providing local governments with hazard mitigation grants, typically with a 25 percent cost-share requirement, to fund various infrastructure projects. However, as stated in a 2019 report by the US Government Accountability Office, the federal approach to disaster risk reduction has been reactive and fragmented, with much of the effort revolving around disaster recovery.

Recently, there have also been concerns about whether the distribution of funds and assistance is equitable. Low-income and marginalized communities often have trouble tapping into government resources because of, for example, cost-share requirements or difficulty navigating the application process.

FEMA leverages its National Flood Insurance Program (NFIP), which provides the vast majority of flood insurance policies in the United States, to spur more community-level flood control practices. For federal flood insurance to be available to their residents, communities are required by the NFIP to adopt certain floodplain management practices, including stricter building codes and rules about first-floor elevation in floodplains (referred to as “free board” requirements).

To further incentivize community actions, FEMA also administers the Community Rating System (CRS). This program gives points to communities that engage in various activities such as protecting natural floodplain functions, relocating flood-prone buildings or protecting them in place, and improving drainage systems. The CRS points are then converted to a 5–45 percent discount on flood insurance premiums in the NFIP for policyholders in these communities. A recent study found that the benefits of flood damage reduction from the CRS program approximately offset the program’s costs.

Educating homeowners about flood risk is also critical for fostering a culture of hazard mitigation and resilience within communities. FEMA has implemented outreach campaigns and other initiatives but changing homeowner behavior has proved to be challenging. Outreach efforts do not always reach all homeowners equally, for one thing, especially in communities with diverse needs, languages, and educational backgrounds. In addition, probabilistic information about floods, which occur infrequently and have different degrees of severity, can be difficult to understand. Finally, many studies have shown that people have various kinds of biased beliefs and decisionmaking processes that can be hard to overcome.

Gilbert White, a geographer who pioneered floodplain management, famously wrote, “Floods are ‘acts of God’, but flood losses are largely acts of man.” Flood losses are “acts of man” because they are primarily a function of the number of people and the value of assets in harm’s way. Despite the risks, populations in flood-prone areas of the United States, especially coastal areas, continue to rise. The same is true globally. To stem this tide and reduce exposure, effective policies are needed. We describe a few of the main ones in this section.

Property Buyouts

One option for reducing flood exposure is to move populations out of hazardous areas through property buyouts, where the government purchases flood-prone properties from homeowners and converts them to open space. A variety of these programs exist in the United States. For example, property buyouts are part of FEMA’s Hazard Mitigation Grant Program, and various state programs exist with funding from the Community Development Block Grant from the US Department of Housing and Urban Development. However, these programs tend to be limited in scale because it is expensive to buy developed properties. To convince households to voluntarily sell and relocate, buyout offers are often made following a flood (when households are most receptive to a buyout) at pre-disaster market values. In the New York Rising Buyout Program following Hurricane Sandy, the average buyout price per property was about $392,000.

Because of the high cost of buying out properties where people already live, some buyout programs target undeveloped land. These purchases can include conservation easement purchases—where the land stays in the owner’s hands but they are not allowed to develop the land—and public acquisitions in which the land is retained as a park or other open space.

Zoning and Other Land Use Regulations

One way local governments can limit inappropriate development is by implementing zoning and other land use regulations in high-hazard areas. Regulations limiting development in floodways—the highest flood risk locations, within and next to the channel of a river—are common. However, beyond these very high-risk areas, local governments are often reluctant to restrict development too much. This is because of concerns over losing property tax revenues, which are local governments’ most important source of revenues, and legal “takings” issues.

Some localities are starting to move to climate-informed zoning practices. For example, the cities of Norfolk, Virginia, and Boston, Massachusetts, have adopted resilience zoning overlay maps, which identify relatively safe areas where the cities want to guide future development and riskier areas where development is discouraged.

Flexible zoning options are another approach, such as transfer of development rights programs in which property owners in high-risk areas are permitted to sell their development rights for use in less risky locations. Once the development rights are lifted and sold, the land in the high-risk area is deed-restricted from further development.

Implicit Development Subsidy Removal

Another approach to pre-empting development in risky areas is to remove implicit development subsidies. Implicit subsidies can include funding for infrastructure and disaster assistance, as well as subsidized federal flood insurance. A recent study by RFF researchers evaluated this approach by examining the long-term impacts of the Coastal Barrier Resources Act (CBRA) of 1982, which removes these federal subsidies in designated coastal areas. The findings suggest this approach can be highly effective in reducing flood exposure–development dropped substantially in the designated areas and flood damages decreased in the coastal counties that include CBRA lands. The study also found that the policy generated positive spillover effects to surrounding areas by conserving natural land that provides flood protection and other ecosystem services.

Public Information and Education

Flood risk education can be important for encouraging homeowners to invest in flood mitigation. Information about flooding is also very important for people deciding where to live, especially when the information is provided during the home purchase and rental processes.

Different states have different disclosure laws governing whether a property’s flood history and flood zone status should be disclosed when it is transacted (see Figure 2), and research has shown that these laws affect how flood-prone properties are valued. On June 30, 2023, New Jersey passed its Flood Risk Notification Law mandating that landlords and home sellers disclose flood risk. We expect the policy landscape of disclosure laws across states to continue to evolve, though homeowners and the real estate industry sometimes push back against such policies.

Flood mapping is a key component of risk communication and disclosure. The NFIP produces maps that delineate the Special Flood Hazard Areas (SFHAs) in communities, the lands where there is at least a one percent chance of flooding annually. Homes in the SFHA with mortgages backed by the federal government are required to have flood insurance. However, the sharp lines of the FEMA flood maps may convey a false sense of security for people living outside of SFHAs by suggesting that their properties are not exposed. On the contrary, many non-SFHA areas face substantial risk. A study of the Houston area, which was devastated by Hurricane Harvey in 2017, shows that 75 percent of flood damages over a ten-year period (1999-2009) occurred outside the city’s SFHA.

To address this issue, many continuous flood risk measures have been developed by nonofficial sources, such as the Flood Factor score by the First Street Foundation. A field experiment on a real estate website shows that, when such information is displayed as part of the property features, people search for lower-risk properties. FEMA’s Future of Flood Risk Data Initiative is also developing property-level flood hazard information to get around the problem with SFHA maps.

Insurance Pricing

Accurately pricing insurance can be another way to demonstrate the risk of living in a flood-prone area. If an insurance policy on a property is priced to be actuarially fair, then the sum of the prices paid over time will be roughly equal to the claims paid out when the property is hit by floods. As such, an insurance policy on a high-risk property will cost more, signaling the cost of living in a flood-prone area to home buyers and owners.

Prices for NFIP policies, however, are explicitly and implicitly subsidized—i.e., held below actuarially fair levels—for a variety of reasons. This has hampered the program’s ability to convey risk. The NFIP has gone through several reforms in recent years and continues to evolve, moving toward a pricing system that more closely and accurately reflects risk for individual properties. However, higher prices have led many homeowners to drop their NFIP policies, raising concerns about the financial vulnerability of uninsured households when a flood strikes. The experience with the NFIP reforms shows that there is an inherent tension between the two roles that insurance plays—conveying risks in a way that affects people’s decisions about where to live and providing affordable coverage in the event of a disaster.

Even with investments in risk mitigation and reductions in exposure, there will be floods. Therefore, emergency preparedness is critical and includes a range of programs to help people cope with disasters. These programs, which are usually led by state and local emergency management agencies, include evacuation plans, early warning systems, and communication and education materials for households about how to prepare for and handle a flood.

Flood insurance, federal disaster aid, and loans provide the main financial resources to assist households after a flood occurs. Studies show that having a flood insurance policy is the single most important factor in ensuring a fast and full recovery. Residential NFIP policies pay out a maximum of $250,000 to cover building damage and up to $100,000 for damage to building contents, such as furniture and personal belongings, and claims following a disaster are processed relatively quickly.

By contrast, without insurance, post-disaster individual assistance from FEMA is capped at $37,000, and most households get much less than that. An analysis of individual assistance in 2017, a year marked by the worst hurricane season on record with Hurricanes Harvey, Irma, and Maria, showed that payouts averaged only $13,100.

Another option for post-disaster assistance is a Small Business Administration (SBA) loan, but these tend to be limited to homeowners with good credit. Survey results in a recent study show that only 7 percent of households that experienced a disaster accessed SBA loans for recovery.

As described in Flooding 101, low-income and socially disadvantaged households are most vulnerable to flooding. They are less likely to have flood insurance and the personal savings necessary for recovery and often have difficulty navigating the processes required to access federal disaster aid. They may have underlying health conditions or other factors that make them more vulnerable.

Studies have also shown that resilience and hazard mitigation investments tend to go to wealthier communities for a variety of reasons such as local matching fund requirements; technical expertise needed to fully understand mitigation options and navigate grant requirements; and a reliance on benefit-cost analyses that, by design, tend to favor communities with relatively high property values (benefits consist primarily of avoided flood damages, which are higher for higher-valued properties).

FEMA has made a number of changes to their grant processes in recent years to try and address some of these problems. For example, the matching fund requirements have been lowered for small and disadvantaged communities. In addition, the agency is providing technical assistance to communities to help them navigate the grant process. They also allow communities to use “off-the-shelf” benefit calculations for certain mitigation investments (such as building elevation projects), which greatly reduces the burden of conducting a benefit-cost analysis. FEMA has also altered the way that benefits to disadvantaged communities are calculated in pre-disaster mitigation grant programs to partially offset the problems created when property values are relatively low. Some programs, such as the Building Resilient Infrastructure and Communities program, now prioritize equity in grant selections.

To address the insurance gap in low-income and marginalized communities, experts have suggested a number of so-called inclusive insurance products. One of these is parametric micro-insurance—a simpler, lower-cost insurance product that provides limited payouts to households based on specific “parameters” of a disaster rather than claims assessments for individual properties. Other options include public-private partnerships that support community-level insurance and subsidies for the most vulnerable households.

The policies described in this explainer outline some solutions for reducing flood hazard and exposure, improving emergency preparedness and disaster recovery, and enhancing equitable resilience. Addressing flood risks is challenging because of the many factors that affect both individual and community decisions about mitigation investments, development locations, flood insurance choices, and more.

Information gaps and misunderstandings about flood risks loom large. Going forward, a few key ingredients are needed for successful flood policies. First, make sure that there is proper communication of flood risk to the public. Second, put in place the right incentives for different actors to mitigate risk and exposure. Third, reduce vulnerability by prioritizing disadvantaged communities in disaster preparedness and assistance to ensure equitable outcomes.