The Federal Reserve Bank of New York has published a report titled “Flood Risk and the Tristate Housing Market,” revealing significant vulnerabilities in housing across New Jersey, New York, and Connecticut.
As the seas rise and storms become more severe, flood risk will continue to increase, presenting grave challenges to our nation’s cities, towns, and neighborhoods.
The study identifies nearly one million residential properties—approximately one in ten in the region—as being at high risk of flooding, categorizing them among the top 25% of riskiest properties nationwide.
The findings highlight that more than 400,000 of these at-risk properties are located in low- to moderate-income census tracts, affecting over 1.5 million residents.
The report underscores the heightened financial burden these households may face in the event of flooding, citing both direct and indirect costs associated with flood damage, including potential declines in property values and increasing insurance premiums.
Key statistics from the report indicate that the one million high-risk properties house over four million individuals.
The distribution includes more than 2.5 million people in New York, nearly 1.2 million in New Jersey, and almost 350,000 in Connecticut.
Nearly 40% of the tristate properties at risk of flooding, or more than 400,000 properties, are in low- to moderate-income census tracts, the report finds.
These properties, including single-family homes and multifamily buildings, such as rental apartments, condominiums, and co-ops, are home to more than 1.5 million people.
Notably, some areas are disproportionately affected, with nearly all properties in certain communities, such as Long Beach, NY, and Keansburg, NJ, classified as high risk.
Environmentalist Lisa McCormick expressed concern that the National Flood Insurance Program (NFIP) is outdated, actively encouraging reckless behavior by subsidizing flood insurance in high-risk areas and has systemic failures that have not addressed the escalating risks associated with climate change.
Instead of serving as a safeguard, McCormick believes the program creates perverse incentives that undermine communities and exacerbate environmental degradation.
“Among the shortcomings in the National Flood Insurance Program (NFIP), is the way it treats repetitive loss properties —those that have flooded and received insurance claim payments multiple times,” said McCormick. “Unlike private insurers, the NFIP lacks the legal authority to manage costs by refusing coverage to or dramatically increasing rates for properties with excessive claims.”
The report notes that low-and moderate-income households are often least prepared to shoulder the expenses that follow a flood, including direct costs, such as property damage, and indirect costs, like falling property values and rising insurance premiums.
Jake Scott, a community development analyst at the New York Fed and one of the report’s authors, emphasized the widespread nature of the flood threat, stating, “The threat of floods in the tristate area isn’t confined to the coasts. Extreme rainfall, flash floods, and overflowing rivers threaten homes and businesses in inland cities including Buffalo, Syracuse, and Newark.”
The report includes case studies from four communities—Keansburg and Hoboken in New Jersey, and Syracuse and Brooklyn in New York—focusing on local planning and response strategies regarding flood risk.
This research builds upon previous studies by the New York Fed, addressing the economic implications of flooding for residents and the vulnerability of specific housing types, such as basement apartments in New York City.
The report is part of the New York Fed’s broader Community Development initiatives, which target health, household financial well-being, and climate risk.
Among the significant shortcomings highlighted by McCormick are the NFIP’s subsidized insurance policies incentivize development in flood-prone regions, further endangering lives and properties. She argued that the program is ill-equipped to manage the increasing frequency and severity of floods linked to climate change, leaving communities vulnerable to catastrophic events. The failure to provide adequate information about a property’s flood risk, she noted, leaves homeowners and renters uninformed and unprepared.
McCormick also said that the NFIP relies heavily on outdated historical data instead of incorporating future risk projections, which is essential in adapting to the evolving climate landscape.
She pointed out the program’s insufficient flood maps, which lack a uniform development methodology, resulting in poorly informed community planning. Moreover, the NFIP’s dependence on the U.S. Treasury for financial backing allows it to avoid necessary adjustments in pricing that private insurers would typically employ to manage risk.
The National Flood Insurance Program (NFIP) has paid out over $90 billion in claims since its inception in 1973, about $21 billion since 2020 and $35 billion during the previous decade. In a nation grappling with rising sea levels and increasingly severe storms, McCormick argued that the NFIP’s current structure is a recipe for disaster.
The New Jersey environmentalist urged lawmakers to prioritize comprehensive reforms to the program, advocating for a framework that emphasizes equity, environmental responsibility, and sustainability.
Supporting her call for change, Joel Scata from the Natural Resources Defense Council stated that the program must be reauthorized and reformed to ensure that communities are prepared for future challenges.
The building and land-use standards that communities must adopt in order for residents to purchase NFIP insurance haven’t been comprehensively updated since the 1970s. These outdated codes, established decades before climate change was a household term, “are failing to keep our nation’s communities safe, and will continue to do so as climate change makes flooding more common,” Scata says.
In 2021, NRDC and the Association of State Floodplain Managers jointly petitioned FEMA to update its standards in order to reflect the new climate reality.
Among their requests were that all new or substantially improved structures be elevated higher than the level of a 100-year flood; that all new and revised maps depict how the floodplain will change over time, especially concerning sea level rise; and that homeowners seeking to retrofit their homes have easier access to NFIP funding.
The failure to address these critical issues could have devastating consequences for communities across the country according to McCormick, who chided lawmakers who have ignored the urgency of reforming this vital program in the face of escalating flood risks.
As concerns over climate change and extreme weather events continue to grow, the findings call for increased awareness and action to mitigate flood risk in the tristate housing market.