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Researchers say some Delawareans pay too much for flood insurance, others too little

Sophia Schmidt, Delaware Public Media

Flood risk is increasing in low-lying, coastal Delaware due to climate change.

But nationwide, flood insurance rates aren’t high enough to cover the growing risk, or even the risk right now. 

Delaware Public Media’s Sophia Schmidt examines the cost of flood insurance in the First State.

Delaware Public Media's Sophia Schmidt reports on flood insurance in the First State.

Last week, concrete was poured for the pilings that will raise a brand new house off the ground—and hopefully out of the reach of future flood waters. 

The house is right off Cedar Street, which is sandwiched between the Delaware Bay and the Lewes and Rehoboth canal along Lewes beach. Cedar Street is known to flood when water from the canal spills over embankments. 

Credit Sophia Schmidt, Delaware Public Media
Construction workers build pilings to raise a home above  floodplain standards

The whole street is in the Federal Emergency Management Agency’shigh-risk flood zone, and the agency projects a 1-in-100-year flood there would reach an elevation of 8 feet. 

Credit Sophia Schmidt, Delaware Public Media

But a resident named Richard, who owns the flood-prone lot and is paying to build the new house on it, isn’t worried. 

“We would have to have a 12-foot tide surge to have flooding get into the living area,” he said. 

The living area is elevated thanks to requirements of FEMA’s National Flood Insurance Program—and of the City of Lewes. 

Cedar Street is a patchwork of small, older cottages that are built flat on the ground, before the elevation requirements, and newer, bigger houses built up on tall foundations or with garages underneath. 

When Richard, who declined to use his last name, bought his property as a second home eight years ago, it was one of the small ones. Now that he’s moved to Lewes full time, he’s replacing it with something bigger.

He did consider the cost of flood insurance before buying, but says for now, it’s not a financial burden. 

“Not right now,” he said. “But I'm retired also, so who knows what's gonna happen in the future.”

Flood insurance premiums could increase in many places under a new risk-based flood insurance pricing scheme FEMA plans to implement this year. 

The National Flood Insurance Program is $36 billion in debt, because it pays out more in claims than it collects in premiums. Through the program, taxpayers subsidize risky development. 

If all homes nationwide with substantial flood risk were to insure through the National Flood Insurance Program (NFIP), rates would need to more than quadruple to cover current risk. That’s according to a recent analysis by First Street Foundation, a nonprofit research group that studies flood risk. 

The group used a probabilistic flood model that accounts for climate change, and found that current flood insurance rates would need to increase more than seven times to cover the growing risk by 2051. 

“In Delaware in particular, we see that there's a bigger disparity in terms of economic damage for properties that do experience structural damage from flooding events relative to their NFIP policies,” said Jeremy Porter, head of research and development at First Street Foundation. 

Credit Sophia Schmidt, Delaware Public Media
A house on Cedar Street with the living space elevated above a garage

Porter’s team found that out of any state, Delaware has the largest gap between estimated flood insurance premiums and the economic damage due to flooding that researchers expect from their risk model. 

“Really that's driven by a couple of things,” he said. “One is the fact that the places that are likely to be impacted by flooding, in Delaware, tend to be places with high property values, and really high probability of flooding. So places like Lewes, Delaware, which has two-year, five-year, pretty high probability flooding depths, also has an average property value of over a million dollars.”

Credit Sophia Schmidt, Delaware Public Media
A road off Cedar Street leading to Lewes beach

First Street Foundation limited its analysis to one-to-four-unit residential properties with “substantial” flood risk, defined as 1% or greater annual chance of at least 1 cm of inundation to the building. 

In Delaware, Lewes is one of the municipalities with the biggest difference between First Street’s average expected loss each year on these flood-prone properties, and the average premium they pay through the NFIP. 

That’s about $2,500 a year for insurance, compared to $38,000 in yearly modeled loss.

Lewes is also one of 11 municipalities and counties in Delaware where residents get a discount on flood insurance because of actions the local government took to reduce or plan for flood risk.

Cheaper rates for reducing risk

City of Lewes building manager Robin Davis stands to the side of the community’s main road, looking out on a swath of marshland. It’s a sunny day, but water pools in the marsh, which is bordered by the Lewes and Rehoboth Canal and the city’s wastewater treatment plant. Across the street, cars turn into a stripmall with a realty office, a takeout restaurant and the Daily Market convenience store. 

The grassy plot has been left intentionally undeveloped — to reduce flooding in other parts of Lewes.

Credit Sophia Schmidt, Delaware Public Media
A swampy open area in Lewes absorbs flood waters

“I helps, it really does,” Davis said. “If that was road surface or concrete, the water ... would have to go somewhere else. This way, at least it does have a chance to recede back into the ground.”

Preserving open space earned the City of Lewes points under FEMA’s Community Rating System, which incentivizes local governments to take steps to mitigate or prepare for floods and rewards them with discounts on residents’ flood insurance.

Lewes residents currently get 5% off their premiums, which is the program’s smallest discount. But residents in FEMA’s high-risk Special Flood Hazard Areas will get 10% off starting April 1. 

The upgrade is a result of actions the City took in recent years, including outreach and education, and a building policy known as "freeboard,” which adds an 18-inch vertical buffer to FEMA's elevation requirements. 

Credit Sophia Schmidt, Delaware Public Media
Davis stands next to a house on Cedar Street that was built flat on the ground, before floodplain requirements.

“It's basically a safety factor,” said Davis. 

Lewes doesn’t seem to be seeing the damage that First Street Foundation estimates. 

State environmental officials have questioned First Street Foundation’s loss estimates as overblown. 

Davis says there’s been minimal property damage from flooding in the seven years he’s worked for the City. 

“It’s more street flooding,” he said. “There are some homes, [but] again, we don't get that massive 120, 130 mile-per-hour winds, the storm surge that comes with the hurricanes.  Or we haven't, which is very fortunate.”

But Lewes’ luck may not last, as climate change brings more frequent and more intense storms, and higher sea levels. Davis understands this. 

“Us being fortunate that right now, we've been on the lower end of the scale of being hit with a major storm—the chances are always greater, I think, now and in the future,” he said. 

Intermediate sea level rise scenarios accepted by the Delaware Geological Survey and the National Oceanic and Atmospheric Administration (NOAA) put the yard and side street where Richard’s new house is being built underwater before the end of the century.

The way flood insurance is currently priced, it’s not deterring construction in the flood plain. 

“Even during our COVID year, we've been pretty fortunate with the home buildings in general,” Davis said. “People are still building. People are buying the older homes that are on Lewes beach and demolishing them and turning them into newer homes.”

“Which is good if they're going to do it that way,” he added. “It puts those homes into a higher standard [of flood protection.]”

An unequal system

Not everyone in Delaware is getting as good a deal on flood insurance as the residents of Lewes.  

An NPR analysis of First Street Foundation and U.S. Census Bureau data found that nationwide—and in Delaware—the people who are getting the best deals on flood insurance live in communities that are whiter and whose median household income is higher. 

According to First Street Foundation, the average flood insurance premiumin majority-white Lewes only covers about 7% of the current average annual loss the researchers estimate forproperties with substantial risk of damage due to flooding. The median household income in Lewes is nearly $89,000. 

But in the 19801 ZIP code, which coversmuch of the City of Wilmington, including flood-prone Southbridge, First Street’s data show the average flood insurance premium is more appropriately priced to cover flood damage. In fact, residents there appear to be slightly overpaying. 

First Street Foundation estimates the average NFIP premium for properties with  substantial risk is $1,471  in 19801, where the median household income is around $30,000. First Street Foundation assumed a coverage of $250,000 for each policy, and did not include coverage for the contents of buildings. 

Credit Sophia Schmidt, Delaware Public Media
Low-lying Barbara Hicks Park on Bradford Street

Southbridge is situated in the bend of a tidal river. The neighborhood’s low elevation and poor drainage have meant decades of periodic flooding.

Credit Sophia Schmidt, Delaware Public Media
Shavonne White's house on Bradford Street

Shavonne White had only lived on Bradford Street a few years when she had her first real experience with it. It was a rainy evening in 2012.

“I went to bed, and I was awakened about six o'clock in the morning. Someone was banging on my door.” she said. “It was my neighbor. And I looked out, and it was just like the sea. … The water was up to all of our door handles of our cars.” 

White’s car was totaled. But the flood waters didn’t reach her house, since it’s built up higher than the street. 

She does have flood insurance—because it’s required for houses like hers in FEMA’s high-risk zone, with a federally backed mortgage. 

“When I first found out that I had to have flood insurance in order to have a mortgage, I was a little surprised, because I wasn't told that by my realtor at the time,” she said. “When I got the quote, I was shocked.”

White learned flood insurance would cost her over $1,200 a year. She was able to get her premium reduced by more than half by producing the house’s original elevation certificate. But even if she hadn’t, she says she still would have bought the house.

“Homeownership is very important,” she said. “I was a young mother at the time. So it was very important to me, and it was a situation where I could afford it. But just because you can afford something doesn't mean you want to have to pay.”

Wilmington residents don’t get the Community Rating System discount that residents of Delaware beach towns—and even unincorporated New Castle County—enjoy.

Wilmington Mayor Mike Purzycki’s office says the City looked into joining the program several years ago, but didn’t have enough points to qualify. 

Since then the City has started a $28 million wetland park and sewer separation project meant to reduce flooding in Southbridge. City officials say the wetland park will be complete by the end of summer, and the sewer separation project will be finished in the next few years.

The City has also enacted an 18-inch freeboard policy, just like Lewes.

“We may be in a better position today to qualify, so we are looking to see if we can gain a benefit for City residents and businesses of being eligible for lower flood insurance rates,” the Mayor’s Deputy Chief of Staff John Rago said in an emailed statement. 

The Community Rating System discount likely accounts for little of the difference in flood insurance deals that First Street Foundation found residents of Lewes and Wilmington are getting. Experts say it’s probably due, at least in part, to the fact that flood insurance premiums don't take into account how expensive a house is. So the same flood in Southbridge and Lewes would cause pricier damage to the bigger homes in the beach town.

But Community Rating System discounts could help residents afford flood insurance—and offset the higher rates that are expected in the future. 

Participation in the Community Rating System also seems to reduce flood damage.

Wesley Highfield, a flood mitigation expert at Texas A&M University, found in a 2017 study that communities participating in the program experienced 42% fewer flood insurance claims than similar communities that did not participate. He says policies like freeboard were associated with the biggest reductions.

“Any policy that has the effect of removing a structure [from the floodplain], either by elevation, or by horizontal—not building it there in the first place—is the most effective,” Highfield said.

Southbridge resident Shavonne White found out about the Community Rating System back when she bought her house in 2009.

“I labored over that FEMA website for days and hours and seemed like months,” she said. “When I came across it, I was surprised that Wilmington wasn't on it."

White says she reached out to local elected officials about the Community Rating System, but never heard back.

Credit Sophia Schmidt, Delaware Public Media
Sophia Schmidt, Delaware Public Media
Hanifa Shabazz, former Wilmington City Council president, in front of her home on Bradford Street

Hanifa Shabazz, another resident of Bradford Street in Southbridge and former president of Wilmington City Council, says the City should now do whatever it can to secure flood insurance discounts for residents. She says in her 16 years on City Council, she heard from constituents about the financial and psychological costs of “the hell of living in a neighborhood that constantly floods.”

“Can you imagine if your heater, your washing machine is flooded—the costs of that and the inconvenience it has in your life?”

Shabazz says she’s not surprised by NPR’s findings that whiter, richer communities are getting the best deals on flood insurance.

“That rings true for everything in America,” she said. “That's just the American way.”

Could flood insurance changes level the playing field?

FEMA plans to implement its new insurance pricing scheme—called Risk Rating 2.0—this fall.

Risk-based price signals should give homeowners a clearer understanding of their true flood risk. But the Congressional Research Service noted in a January reportthat Risk Rating 2.0 could lead to premium increases for some policyholders that make flood insurance unaffordable.

According to NPR, changes proposed under Risk Rating 2.0, like factoring home value into pricing, could narrow some of the race and income disparities they identified.

But Southbridge still faces increasing risk from climate change. Like parts of Lewes, Shavonne’s street and several others in her neighborhood are expected to be underwater by the end of the century. In NOAA’s high sea level rise scenario, that could happen as soon as 2050.

First Street Foundation estimates that under a risk-based premium structure, 30% of NFIP policyholders in Delaware would see their rates increase. Research and development head Jeremy Porter says this is higher than the expectation nationwide.

Credit Sophia Schmidt, Delaware Public Media
Lewes beach

“[Delaware’s figure] is really being driven by that 30% or so of the properties that are at extreme risk on really low-lying land right on the coast,” Porter said. “The fact that the whole state is coastal really impacts Delaware. You can actually see the variation when you look at increases versus decreases in places like Kansas and New Mexico—those places are going to decrease. But all up and down the eastern seaboard, there's a high percentage of [potential rate] increase.”

FEMA is restricted to increasing flood insurance rates for primary residences by no more than 18% per year. 

If insurance rates rise in Southbridge, it could hurt the neighborhood’s low-income residents.

Shavonne works for the state, where she leads the Office of Supplier Diversity. She says even if her flood insurance premiums go up, she doesn’t expect to be priced out. 

“My worry is more about other residents who are here in Southbridge who are on fixed incomes,” she said. “And someone who was in my situation at the time, wanting to become a first-time homeowner, looking for something that they could afford, and then being priced out because of flood insurance.”

“The Southbridge neighborhood is predominantly a Black neighborhood,” White added. “That's going to deter other Black people from owning a home, from getting some type of wealth for their family.”

For his part, Richard, the retiree building a house in Lewes’ floodplain, thinks flood insurance premiums should accurately reflect risk.

“If the government is not charging enough for flood insurance, someone's paying for it,” he said. “And that's the taxpayers—we're subsidizing the fact that, if someone wants to build a million-dollar house on a sandbar in the middle of a hurricane zone, it's pretty likely that it's going to get wiped out every once in a while. From that standpoint, you should pay the fair amount of insurance. It's just it's always been subsidized, because they never have. So if they change it now—it is what it is.”

FEMA has struggled to keep flood insurance affordable—and the flood insurance program on solid financial ground. This is in part because any change that increases premiums for some constituents is a hard sell politically.

Risk Rating 2.0, first announced in 2019, has already been delayed once. The New York Times reported earlier this month that Senate Majority Leader Chuck Schumer (D-New York) objected to the proposal again this year, and that FEMA has paused its rollout.

Questions about the data

First Street Foundation’s Jeremy Porter paints his group’s analysis as “another datapoint” to help communities and homeowners understand their risk. Not everyone accepts the project as authoritative.

Gina Tonn, an engineer in the Delaware Department of Natural Resources and Environmental Control’s Shoreline and Waterway Management Section, notes several of First Street Foundation’s current yearly loss estimates in Delaware are an order of magnitude higher than historic NFIP claims.

Using data from FEMA, Tonn found NFIP paid a total of less than $1.4 million in building claims in Lewes over several decades, compared to First Street’s model-based estimate of $14.9 million in flood-related loss there during just this year. First Street’s analysis included a smaller subset of properties than the historic NFIP claims. 

“Based on my experience working with the City of Lewes on flooding-related issues since 1991, the NFIP claims data aligns better with actual reported damages by property owners and the City itself than the [First Street Foundation] theoretical estimates,” said Michael Powell, head of the Shoreline and Waterway Management Section, in an emailed statement. 

Powell also points to several post-disaster FEMA surveys in Sussex County after major flood events, which he says examined hundreds of structures for their risk of future damage. 

“The outcome of these surveys also supported the conclusion that NFIP claims data is more representative of actual damages following some of the most severe flooding events in Sussex County,” he said. 

First Street’s Porter says one reason for the divergence between his group’s analysis and historic claims could be low uptake in flood insurance, even within FEMA’s high-risk areas. And he notes First Street Foundation’s loss estimates incorporate an annualized measure of risk from 2-year through 500-year floods.

“Those types of water levels aren't within our 30-year and 40-year historical record,” Porter said. “If you actually want to understand an annualized damage estimate, you go out further than that, then you're going to get numbers that are significantly different.”

This story has been updated.

Sophia Schmidt is a Delaware native. She comes to Delaware Public Media from NPR’s Weekend Edition in Washington, DC, where she produced arts, politics, science and culture interviews. She previously wrote about education and environment for The Berkshire Eagle in Pittsfield, MA. She graduated from Williams College, where she studied environmental policy and biology, and covered environmental events and local renewable energy for the college paper.
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