Buyers Beware: Owners are Selling Properties Targeted for Sea Level Rise Flooding Buyouts

The Miami Herald ran two articles (both behind paywalls/titles listed below) on Sunday that discussed how the Florida Keys and Miami-Dade County are managing properties targeted for buyouts due to storm surge and sea level rise flooding. The Florida Keys is making some slow process in purchasing distressed properties, while Miami-Dade County has dropped the ball completely. In both locales, some owners dazzled by rapidly appreciating real estate prices have resorted to selling properties to buyers after applying to buyout programs, which, unfortunately, puts the new buyers, wittingly or unwittingly, at risk of flooding complications.

Thousands of US coastal properties have been purchased through government buyouts over the last decade, and the trend is accelerating as the sea level rises. Often the buyouts occur after hurricane storm surges (which are growing more powerful and damaging as sea level rises) flood neighborhoods. Buyouts are also becoming more common in areas that experience so-called rainy day or nuisance flooding due to much higher than normal tides.

National and state governments are eager to remove properties that require frequent, expensive repair or replacement from repeated flooding from the insurance rolls. They also want to avoid the expense of maintaining critical infrastructure — such as roads, sewer and water systems, and storm drains — in flood-prone areas.

After Hurricane Irma sent a powerful and devastating storm surge into some of the Florida Keys in 2017, Monroe County acquired federal funding to buyout damaged and flood-prone properties. The county received 80 applications from real estate owners and has purchased nine properties. County officials hope to buy another dozen soon.

According to the Miami Herald article, one massive roadblock that has prevented more purchases is rapid appreciation in the housing market over the last couple of years. In some cases, owners who had agreed to the buyout and demolition of their frequently-flooded properties decided instead to sell them for prices higher than they would have received under the buyout program. To remedy the situation, the county has received permission to offer more money for properties from the state agency that’s coordinated the buyout funds.

Miami-Dade County initiated a similar buyout program, but in three years the county hasn’t purchased a single one of ten properties that were targeted by buyouts. The lack of performance has led to the state administrative agency taking back the funds that were to be used for the purchases. Some of the buyout eligible property owners are angry that the county failed to complete the purchases as promised. In one instance, a developer has purchased a flood-prone property with the intent of constructing an 11-unit building on the lot. The developer was unable to tell the county what steps it would take to flood-proof the property but the county approved the project anyway.

Buyouts are controversial but necessary in areas where properties cannot be protected from storm surge and sea level rise flooding. Buyout opponents believe no matter how many times a property floods, insurers and governments are responsible for helping them to repair the damage and maintain roads and water and sewer service. Proponents, however, recognize when the battle is lost and they appreciated the government assistance when they’re ready to move on.

The current situation where some homes targeted for buyouts are actually purchased and demolished while others are being sold to buyers with or without them being aware of the property’s flood status needs to be addressed. The fact is each state has its own seller disclosure laws, so too often buyers are left in the dark about the level of threat posed by storm surge and sea level rise flooding. Until this unfair situation is resolved, buyers need to gather information from more than just sellers to ensure they’re not purchasing a property that was targeted for a buyout unless they’re prepared to accept the risk that their investment will literally end up underwater.

Editor’s Note: Here are the paywall protected article titles “Miami-Dade failed to buy flooded homes; Now high-risk sites open to more development” and “Buyouts take flood-prone Keys properties off the market. There are more sellers waiting”.

Hot Housing Market Chills Flood-Prone-Housing Buyout Programs

One tool local officials have to combat sea level rise flooding that damages residential real estate is home buyouts. According to an Associated Press article, the Federal Emergency Management Agency (FEMA) has spent nearly $3.5 billion over the last 30 years to help communities purchase nearly 50,000 flood-prone properties. Typically buyouts are used so communities and insurers don’t have to bear the cost of repairing or rebuilding houses that repeatedly flood.

The rapid appreciation in real estate value over the past year, however, is posing a challenge to officials trying to buyout flood-prone homes. According to the Associated press report, owners who would usually accept the terms of a buyout are now, in many cases, turning them down with the hope that a buyer will pay even more than the buyout program offers. Another reason some owners are reluctant to sell is that they realize that all the real estate in their community has been appreciating so finding a replacement home in a location that doesn’t flood at an affordable price can be quite a challenge.

In response to the real estate appreciation challenge, FEMA is offering more money — up to $31,000 — to help homeowners find affordable replacement housing. Some states are also offering extra money to people who agree to be bought out.

Refusing a buyout is not without risk for homeowners. If their house floods while it’s up for sale, it will be difficult to find a buyer willing to purchase it. This is an especially serious issue for property owners in coastal communities during hurricane season.

This buyout situation should serve as a cautionary tale for buyers. To avoid unknowingly purchasing a flood-prone home that really should be bought-out to stop the repair and rebuilding cycle, they need to perform due diligence and determine whether the risk is worth it to them. Some coastal states — like Florida — don’t have strong sellers’ flood disclosure requirements, so they will have to conduct research on their own to independently confirm whether a property is flood prone. FEMA flood maps, local real estate agents, insurers, and mortgage providers are a great place to start.

Miami’s Sea Level Rise Real Estate Challenges Coming Soon to a Coastal Community Near You

Miami’s extremely low elevation puts the city at the front lines of the battle against sea level rise flooding. The city is constantly grappling with ways to control floodwaters that are serving as a general guide for other cities and town all along the Atlantic, Pacific and Gulf of Mexico coastlines.

This week, the city of Miami unveiled its “Miami Forever Climate Ready” plan to combat climate change and sea level rise flooding. Jane Gilbert, the city’s resiliency chief, said the plan outlines 86 actions that need to be taken to control flooding and reducing the city’s carbon footprint.

Among the recommendations to address climate change heat are making buildings more energy-efficient, buying electric vehicles, and planting more trees. To meet the challenge of rising seas, the city plans to upgrade failing stormwater system, raising sea walls, installing stormwater pump stations, and creating wetlands to shift floodwaters from city streets. In areas that experience extreme flooding, the city is considering buying out private property, which, in many cases, is cheaper than rebuilding structures that are repeatedly damaged by floodwaters.

Massive amounts of money will be needed for the city to address sea level rise flooding and climate change, which will worsen in the decades to come. City officials say the challenge is finding funding for the projects when real estate could lose value, which would reduce the amount of tax revenue the city has to work with. If this happens, issuing bonds to pay for the projects could also become more difficult.

Despite the challenges, the report says Miami shouldn’t wait to implement the recommendations. The report says, “Now is the time, while Miami’s economy is still growing, to turn this climate change into an opportunity.” In 2017, Miami voters approved a $400 million bond to improve the city’s sea level rise flooding defenses.

Buyers, sellers, owners, and real estate agents need to know what their local governments are doing to combat sea level rise for several reasons: 1) The projects could impact their tax rates and flood insurance premiums; 2) The projects could determine whether or not their property floods; 3) The project’s effectiveness could impact their property value; and 4) The projects could impact their quality of life if nearby seawalls are raised or pump stations are installed.

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