The cost of risk: the post-Sandy realities of flood insurance

The policy changes made by the Biggert-Waters act, discussed in the last post in this series, make a lot of sense in the long term. But they also have a real human cost. Although Biggert-Waters passed before Sandy occurred, people who were hit hard by the storm see this as insult to injury. Although the rates were subsidized in the first place, people see this as a rate increase, not the expiration of a special deal. Post-Sandy media coverage in the Rockaways, especially Breezy Point, and the Jersey Shore offers story after story of downtrodden homeowners balking at the material costs of raising their house above flood elevation.

But as interviews done by Superstorm Research Lab attest, the problems with the flood insurance program are more complex than the issues addressed by Biggert-Waters. The implementation of the program, as with so many elements of federal disaster assistance, is slow, bureaucratic, difficult to understand, and poorly communicated. As a volunteer helping to rebuild homes in the Rockaways pointed out,

We have people we’ve worked with who are like, no one has told me anything about my flood insurance rates going up yet so I think that’s bullshit or like we’re not going to raise our home ’cause that’s so much money. (Mold Remediation Volunteer)

Some of the affected residents who SRL interviewed also spoke of a keenly felt sense that the federal assistance programs cared much more for some people than others:

For us here in the Arverne area when we go down to FEMA we go through there are a whole different drawn out plan.  And having friends in Breezy Point and having acquaintances in Breezy Point heard they didn’t have to do half of the things to be assisted by FEMA.  So you can see even from the federal perspective they made the choice… the loss that most landlords suffered it is tremendous because there are some areas because it was a rental they were not helped by FEMA. And those that did not have flood insurance were not helped at all. (Pastor in the Rockaways)

It is absolutely true that Breezy Point endured terrible destruction through fire and flood. But it is also true that, on average, people who lived in Breezy Point had a great deal more in the way of material resources than communities like Arverne and Far Rockaway, resources such as cars and insurance and money for hotels. In communities like Far Rockaway where these resources were scarce people were trapped after the storm in areas with no food, no public transportation, and no electricity.

Q:        Wow.  So this entire area had no power, nothing?
A:        No power, nothing.  My building was the first one to get electricity back, and that was two and a half weeks. So two and a half weeks and then that’s not even hot water or heat. That was just electricity.  A week later we got hot water and heat. (Interview with resident of Far Rockaway)

Even for the segments of the community who were eligible for FEMA assistance, it was difficult to get access to money and to understand how the aid system worked. Nearly a year later, SRL spoke to multiple people who had yet to receive any federal assistance at all despite being eligible. One volunteer with Respond and Rebuild described the situation faced by many of the people she was working with:

FEMA might give you your first check not all that long after the storm but it might be, like, a few thousand dollars. And then you apply your SBA loan, and maybe you get a little more money. And then you get another check from FEMA because you appealed. But it’s not like you know very early on how much money you’re going to get and what you’re going to be able to do with that. And so, like, do you decide when you only have twenty thousand dollars in payback that you’re going to rebuild? Like what do you do with that? Or do you just replace your car that also got destroyed? Do you know what I mean? So because people don’t get whatever assistance and money they’re going to get in one chunk, they just have no idea what they’re going to be able to do. And I think people’s lives are fucked up and they wound up having to take care of that with little pieces of that money along the way. (Respond and Rebuild Volunteer)

The many different levels of government assistance – state, and local as well as the multiple federal agencies offering assistance – didn’t communicate with one another. And because most of the aid programs had caps on the amount of assistance that someone could receive, multiple people were put in the position of being recipients of money from multiple agencies and then having to pay some of it back. On top of this, the NFIP added a new complication for those receiving flood insurance on mortgaged properties:

What they were finding was that when they got their insurance payments, the banks with whom they had mortgages claimed that it was their right to hold onto that insurance payment, because the house was actually the bank’s, right? They hadn’t finished paying their mortgage. So the bank held onto it. And then would disperse that pay amount. (Rockaways hub coordinator)

As noted in the SRL white paper, A Tale of Two Sandys, these problems are representative of larger inequalities in the recovery process. There were the renters who were displaced from their homes, whose landlords would not make repairs, who were not homeowners and thus ineligible for most forms of housing assistance, who suddenly had to come up with a new apartment (complete with new deposit) in a housing market which was already tight, and suddenly faced the loss of thousands of units. There were the renters who didn’t move and faced an extended period of time in substandard housing stock – a situation especially dire for rent-controlled or rent-regulated tenants whose landlords wanted to force them out.

Some homeowners had enough put aside in savings or other emergency funds, or had a large and wealthy enough social network, that they were able to endure for the many months it took to start getting federal assistance for rebuilding (though this endurance came with unimaginable stress). Then there were the homeowners who didn’t have enough emergency reserves, couldn’t sell their houses for anything close to pre-storm prices, whose investments and homes were both gone. This is, of course, assuming that they didn’t have a mortgage-holding bank which had already claimed their NFIP payment.

The Biggert-Waters bill addresses the problems of the National Flood Insurance Program in the abstract, but it doesn’t address the problems that actually manifested on the ground when the NFIP went into action. Entrenched inequality, the glacial pace of disbursement, the difficulty of navigating the bureaucratic ocean – these problems were enough to sink families after the storm – if they were eligible for flood insurance in the first place. So what is the point of having the NFIP anyway, when so much of it is apparently broken? The next, and final, post in this series will address that issue.