New York Governor Andrew Cuomo has announced a $400 million plan to purchase and demolish homes destroyed by Hurricane Sandy and preserve the land permanently as undeveloped coastline. The scale of the proposal is large, as 10,000 homes in the 100-year floodplain were seriously damaged by Sandy. Some property owners have already expressed interest in relocating, including a majority of the households in the Fox Beach section of Oakwood Beach in Staten Island.1
The concept behind government programs to purchase storm-damaged properties is not new. The Federal Emergency Management Agency (FEMA) has long been involved in the purchase of homes in disaster areas. Following large-scale flooding in the Midwest in 1993, Congress amended the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act) to authorize FEMA to acquire flood-prone property.2
While the statute is primarily oriented around flooding, acquisition is also available for other natural disasters. Since 1993, over 20,000 properties have been purchased.3 Following extensive flooding in 1993 and 1995, the entire town of Pattonsburg, Mo., encompassing 233 properties, elected to move out of the floodplain.4 Recent flood-related buyout plans have been implemented in New Jersey, Pennsylvania, and Missouri, and property buyouts have been initiated in upstate New York following Hurricane Irene and Tropical Storm Lee, though no sales have been finalized yet.5
Cuomo's proposal is somewhat different from the conventional FEMA program in that homeowners would receive an extra financial incentive to sell if they stay in their home counties, and, alternatively, if they live in extremely vulnerable areas even if their homes suffered little damage. In addition, in blocks with extreme risks, a 10 percent bonus would be offered if the entire block agrees to sell. The Cuomo initiative would be financed through the $51 billion federal Sandy relief package, as well as through cooperation with the Department of Housing and Urban Development.6
A decision to part with one's home and community is not an easy one. As FEMA describes in literature to prospective participants, the advantages include the elimination of future risk, fair compensation for the property's pre-storm value, and the opportunity for a new start. The disadvantages include the loss of roots and community and the possibility that one's individual economic situation will not improve due to the cost of replacement properties in other areas.7
From the taxpayer's perspective, property acquisitions could result in greater cost savings for the government than continued repair of at-risk properties. In comparison with traditional disaster relief measures, which generally encourage rebuilding in the path of future repetitive disasters, the acquisitions eliminate the cost of maintaining and repairing flood control structures and public buildings and infrastructure, as well as the cost of flood insurance payments. "[F]or many floodplain communities, voluntary buyouts of repetitive loss structures would generate substantially greater long-term cost savings than continuing to rebuild these properties after every flood. Specifically, past buyouts of repetitive loss structures have generated $2 in reduction of future flood insurance payments alone for every $1 invested."8
The Acquisition Process
FEMA does not buy properties directly. State and local communities identify potential buyout areas and submit applications on behalf of homeowners. When the state approves an application, it is submitted to FEMA, which then must determine if the proposal is environmentally sound, within the rules, and cost-effective. If the application is approved by FEMA, then FEMA contributes 75 percent of the funding, while the remainder of the funds are derived from sources including the state and local communities.9
The community buys the properties, acquires title, and clears the land. The process can take months to initiate, but once a homeowner accepts a buyout offer, the average closing takes 45 days. Various limitations exist on what properties may be purchased. Property sites with hazardous waste will not be purchased. In addition, property owners must be U.S. citizens or qualified aliens. While the program is voluntary for homeowners, property acquisitions may come as an unwelcome surprise for residential and commercial tenants and mobile home owners who rent homepads. These individuals are entitled to assistance, including out of pocket moving expenses and increases in rent and utility costs due to the move.10
FEMA's acquisition process is subject to environmental review under the National Environmental Policy Act (NEPA), but the Sandy Recovery Improvement Act of 2013 adds a new provision for "streamlined" environmental review procedures, requiring that adequate resources are devoted to environmental review and that "the shortest existing applicable process under [NEPA] is utilized."11
Homeowners are entitled to the fair market value of their homes before the disaster, as determined by a licensed appraiser chosen by the community. The local community must pay for appraisals, title searches, lot surveys, and other closing costs. The property owner is responsible for mortgages and liens against the property, as well as moving costs and other costs associated with renting or buying a new property.12 If the purchase offer is too low for the owner to purchase a comparable local replacement dwelling, a supplemental payment of $22,500 to the homeowner may be available.13
The final purchase price must be the greatest of the following: the current market value of the property; the pre-disaster market value of the property; the original purchase price of the property; or the outstanding amount of any loan to the property owner secured by a recorded interest in the property. Other additional allowable costs include moving the structure to a new site and the removal of demolition and debris to a landfill.14
By law the property acquired under the program becomes public property that cannot be redeveloped, and must remain open space in perpetuity. The only exceptions include restrooms, public facilities open on all sides, and structures approved in writing by FEMA before construction begins. Additional allowed uses include vegetative sites, picnic shelters, small scale recreational facilities, campgrounds, and unpaved parking areas. Other specific prohibitions include fences, cemeteries, storage tanks and paved roads. The state and locality are responsible for ensuring that the property is maintained in accordance with the land use restrictions and must monitor and inspect the property periodically. If the open space conditions are violated, enforcement options include actions by law, mandatory transfers of title, or the withholding of FEMA assistance.15
The redevelopment of acquired properties has led to litigation. In 1994, Jefferson City, Mo., received federal funding and acquired properties damaged by the severe 1993 Midwest floods.16 Deeds to the properties acquired contained restrictions limiting their use in accordance with the Stafford Act. A number of years later, at the request of Jefferson City, the U.S. Army Corps of Engineers proposed the construction of a levee in the area, which would have been located on 1.46 acres of deed-restricted property, with an additional nearly 30 acres inside the levee. FEMA and the Corps entered into a memorandum of agreement that identified sites that might warrant building on the deed-restricted lands.
The Sierra Club sued, asserting that FEMA had violated the Stafford Act by permitting the levee project to affect land restricted by the Stafford Act.17 The U.S. Court of Appeals for the Eighth Circuit did not reach the merits of the Stafford Act claim, holding instead that the memorandum of agreement did not constitute a final agency action.18 While the merits of the land reuse issue were not reached, the decision demonstrates the possibility of conflicts over land that must remain unused, even as community circumstances and disaster preparedness needs may change over time. Given the high property values in New York City, the desirability of coastal locations for development, the need for infrastructure to serve city business and residents such as utilities, and the unpredictability of future sea level rise and storm surges, such land reuse issues could arise in this region.