ALBANY, NY — A new report provides insight into the hidden costs associated with purchasing a single-family home with a flood history in New York, a state where past flood damages are not adequately disclosed to home buyers. The report – "Estimating Undisclosed Flood Risk in Real Estate Transactions” – was prepared by Milliman and commissioned by the Natural Resources Defense Council.
Key findings from the report are as follows:
The expected future annual flood losses for a home with prior flood damage is significantly higher than the average of all homes. The average home in New York with prior flood damage has an expected average annual loss of $3,126, compared to $93 for the average home. Over the course of a 15-year mortgage, average expected damages to the previously flooded home equate to $46,887 (in today’s dollars); for a 30-year mortgage flood damages equate to $93,774.
In New York, 7,645 homes were purchased in 2021 that were estimated to have been previously flooded. The expected annual flood damages for these sold homes were estimated to be over $23 million.
Even with current conditions the expected losses increase dramatically over the duration of a mortgage. The losses can become even more extreme if climate change follows the Medium Climate Scenario or the High Climate Scenario (see report for the specifics of these scenarios). With these scenarios, climate change makes flooding more likely and more severe, through higher sea levels and changes in precipitation patterns, leading to even higher expected damages over the life of a mortgage for home buyers. For example, for a buyer of a previously flooded home with a 15-year mortgage in New York, estimated damages rise from $46,887 under current climate conditions to $59,872 in the Medium Climate Scenario, and $94,341 in the High Climate Scenario. For a 30-year mortgage, estimated damages rise from $93,774 under current climate conditions to $119,774 in the Medium Climate Scenario, and $188,683 in the High Climate Scenario.
Without proper flood disclosure, a home buyer often does not know the risk and potential lifetime cost associated with the home. Milliman estimates that less than 4% of homeowners in the U.S. have any flood insurance coverage, potentially leaving unsuspecting buyers of previously flooded homes to be substantially more at risk of paying out of pocket for devastating, unexpected flood damages. Additionally, home buyers could be less likely to purchase flood insurance without the awareness that a home had previously flooded, and those that do purchase insurance may be subject to higher premiums than anticipated.
“New York’s disclosure laws do not explicitly require that a seller tell a home buyer about past flood damages,” said Joel Scata, Water and Climate Attorney at NRDC (Natural Resources Defense Council). “The failure to require disclosure of past flood damages is already costing New Yorkers tens of thousands of dollars. Home buyers must have the right to know whether their dream home is a potential nightmare.”
“This study shows how a single- piece of information can substantially improve understanding of flood risk,” said David Evans, Principal and Consulting Actuary at Milliman, Inc. “For a prospective homebuyer, knowing if a home has flooded in the past can be one of the most intuitive and important risk factors to consider.”
“Extreme weather events are becoming more common and are changing how we understand the risks from flooding, both physically and economically. This latest NRDC report pinpoints how transparency and accessibility to information about flood risks is essential. Disclosure must be a priority for New York, New Jersey, and states across the nation. This is critical for advancing environmental justice, decision making and climate communications,” said Cortney Koenig Worrall, President and CEO, Waterfront Alliance. “Waterfront Alliance commends the New York legislature for passage of residential flood risk disclosure for renters, but we must ensure homeowners are included by extending this legislation to cover home sales. The priority in other states, including New Jersey, is to advance new robust disclosure legislation for renters and homeowners.”
For more information, read Joel Scata’s blog about the report.
NRDC (Natural Resources Defense Council) is an international nonprofit environmental organization with more than 3 million members and online activists. Since 1970, our lawyers, scientists, and other environmental specialists have worked to protect the world's natural resources, public health, and the environment. NRDC has offices in New York City, Washington, D.C., Los Angeles, San Francisco, Chicago, Bozeman, MT, and Beijing. Visit us at www.nrdc.org and follow us on Twitter @NRDC.