Protecting homebuyers from surprise flood costs
It was in 2018—the year Hurricane Florence dumped three feet of rain on North Carolina, inundating more than 74,000 buildings—that Joel Scata’s team at the Natural Resources Defense Council (NRDC) realized they had to do something about flooding.
NRDC, where Scata is a senior attorney in the climate adaptation division, is a nonprofit working to confront the effects of climate change. As the earth warms and the atmosphere holds more moisture, severe storms and rain events are making floods more devastating and frequent.
They’re also intensifying the impact of a loophole Scata and his colleagues have long monitored: a lack of real estate flood disclosure laws across the United States.
In North Carolina, for example, a home seller in 2018 was not required to tell a buyer that a property had previously flooded. That meant hurricane-damaged houses could be cleaned up and listed for sale, and new owners could pour their savings into the purchase without understanding the additional risk they were taking on.
Because a home that’s flooded once is likely to flood again.
“If a buyer doesn't know the house is flood-prone, they don't know they need to buy flood insurance,” Scata explains. “They don't know they need to mitigate that risk, and that they could be in a really bad situation when the next flood happens.”
NRDC began to advocate for disclosure requirements at the federal and state levels. But over and over, they encountered a roadblock: Lawmakers weren’t convinced this was really an issue.
Scata knew they needed data—hard numbers that quantified the financial risk to homebuyers, communities, and the government, and showed the undeniable scale of the problem.
For this analysis, NRDC turned to Milliman.
Expert analysis leads to legislation
New Jersey
$100
Average annual loss for never-flooded property
$1,700
Average annual loss for flood-prone property
New York
$90
Average annual loss for never-flooded property
$3,100
Average annual loss for flood-prone property
North Carolina
$60
Average annual loss for never-flooded property
$1,200
Average annual loss for flood-prone property
* Values are approximate
For example, the research found that a North Carolina home that has never flooded might have a $60 average annual loss, or AAL. That’s the financial loss the property is expected to experience annually, averaged over a long period of time, and it gives a homeowner a sense of the cost associated with their flood risk on an annual basis.
In contrast, a flood-prone residence can face a $1,200 AAL—20 times higher—and more than $2,000 in the worst scenario under climate-change projections. Over 15 years, previously flooded North Carolina properties might need more than $18,000 in repairs.
“These are big numbers, and they’re a scary reality that people are going to have to deal with,” Baeder says. “If a homebuyer is taking on this risk, they should be aware of the risk.”
Totals in the Northeast reflected regional price differences but were comparable: In New York, a history of flooding can increase a property’s AAL from about $100 to $3,000. Over 15 years, a flooded New Jersey home might incur $25,000 in damages.
Combined, more than 6% of all homes sold in these three states in 2021 had a record of flooding—and no requirement to warn new owners about this history.
Although grim, Scata was glad to have these results to bring back to lawmakers.
“Before the report, I think legislators knew that people struggled to rebuild after a flood,” he says, “but I don't think they realized just how much it costs a homeowner. These numbers helped lawmakers see this was a big problem, that their constituents were suffering, and that they should do something about it.”
In 2023, New Jersey began legally requiring sellers to disclose a property’s past flooding. North Carolina and New York soon followed, with New York enacting flood disclosure at the end of 2023 and North Carolina amending it in mandatory form in 2024.
“The power of data”
The three states in this initial study now have A grades on the NRDC scorecard, and both New York and New Jersey have implemented additional protections for renters, a group that has even less visibility into past flooding yet faces greater hardships when floods do happen.
To Scata, an even stronger measure of success is the fact that four states where NRDC had not lobbied—Florida, Maine, New Hampshire, and Vermont—in 2024 adopted disclosure requirements on their own, after seeing the need elsewhere.
“The laws show the power of data,” Scata says. “Having Milliman do this work was really important for showing the actual impacts of flood damage on homeowners and effecting change through the legislatures.”
Baeder is now leading a follow-up study for NRDC to expand the research to 25 additional states with insufficient disclosure laws. Scata hopes to ultimately see A grades on the scorecard across the country, so all homebuyers and renters have insight into their flood risk.
“If we're going to tell people about lead-based paint,” Scata says, referring to other widespread real estate disclosures, “if we're going to tell people about asbestos, we should probably tell people about flooding, because flooding has such an impact on someone's finances and health.”
This article was written by Milliman Senior Writer Adin Bookbinder.
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