FEMA Buyouts Offer Uneven Benefits to Flood-Prone Households

Households benefit when they accept buyouts by the U.S. Federal Emergency Management Agency (FEMA) to relocate from flood-prone areas, new research finds. However, the analyses show that the extent of these benefits depends on race and socioeconomic status. Extreme floods are accelerating in frequency and severity, due to human-driven climate change, and some inhabited areas are more susceptible to these events than others. To protect communities, governments are investing in incentives that encourage households to move away from flood-vulnerable areas, including FEMA's property buyout program. Using a difference-in-differences model to gauge cause and effect, Rachel Young has now assessed the program's impact on household residency, relocation, and finances. She analyzed longitudinal records from FEMA, credit bureaus, flood maps, census tracts, and a private consumer reference database. Doing so enabled her to compare outcomes for participating and non-participating households with similar flood risk, as well as households without risk. People who participated in the agency's program were more likely to relocate to safer areas, rather than other at-risk areas. They also saw a temporary decrease in debt and an improvement in neighborhood socioeconomic conditions. However, there was no significant difference in the rates at which households from either high- or low-income areas relocated. Benefits mainly happened for participants originally living in wealthier and majority-white neighborhoods. Young suggests this may reflect housing market constraints faced by households in majority-Black neighborhoods: the average buyout payment was $40,583 for those in this group, compared with $93,977 for those in majority-white neighborhoods. She also conducted a benefit-cost analysis, which yielded ratios ranging from 0.84 to 1.28 depending on one of three scenarios. Under the third scenario – which she chose as the preferred scenario – the estimated benefits fell short of costs. "These results suggest that the long-run value of buyout programs depends not only on the benefits generated by relocation itself, but also on how efficiently those benefits are delivered," Young writes.