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National flood insurance program leaves communities of color and low-income Americans behind, report says


Less than 10% of the flood risk of single-family homes in America is actually insured by the national program designed to provide such protection, with communities of color and low-income areas disproportionately less likely to be covered.

This analysis, described as “a toxin present in the residential real estate market that will only get worse with climate change,” comes from a new report from risQ, a Boston-based provider of climate change analysis for the housing market. municipal bonds.

The report, Economic and Racial Inequality in FEMA SFHA Flood Zone Designations, discusses the National Flood Insurance Program, which is administered by the Federal Emergency Management Agency.

The NFIP offers insurance policies for homeowners in areas prone to flooding. In most cases, there is no alternative in the private market for flood insurance, and such coverage is required for all mortgages with the backing of government entities like Fannie Mae and Freddie. Mac. NFIP policies are heavily subsidized by taxpayers.

FEMA uses what is called a “special flood risk assessment” to develop “special flood risk zones,” which determine where the national flood insurance program is active. But risQ’s analysis found that about three-quarters of the flood risk in the United States lies outside SFHA zones – which means that there is no obligation for homeowners to be insured there, nor access to NFIP insurance.

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Additionally, many homeowners who are required to carry flood insurance do not: risk analysis suggests that only 25% actually do. “Putting all of these numbers together suggests that less than 10% of the country’s total single-family residential flood risk is actually insured by the NFIP,” the report says.

Perhaps more strikingly, the report also finds that “the less white a community is, the less access it has to FEMA NFIP flood insurance.”

Source: risQ

As the graph above shows, Latin American communities are 72% more likely to have their flood risk with FEMA SFHA than all-white communities. That figure drops to 70%, 65%, and 29% for Native American, Black, and Asian communities, respectively.

risQ also maps the correlation between FEMA SFHAs and income levels, using a ratio of housing costs to a community’s income. As this measure increases and housing becomes less affordable, SFHA coverage decreases “significantly and consistently across different levels of flood risk,” the report notes. “Communities with the least affordable housing and the least discretionary income are systematically predisposed to be less insured. “

It should be noted that FEMA is aware of the drawbacks of NFIP and is working to improve the risk methodology it uses.

But this approach is insufficient, argues risQ, because it does not redefine SFHA zones. “As such, it will leave non-white and low-income communities even further behind,” the report concludes.

“To build a more equitable and sustainable program, FEMA should also focus on restoration investments, both in terms of immediate action on the modeling of floodplains in historically deprived areas, thus making insurance against flooding much more accessible, especially for those communities that have been left behind. .

Read more : Climate risk hits states and local governments

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