Enhancing Flood Resilience: The Impact of Removing Development Incentives from High-Risk Areas

The Natural Experiment: Coastal Barrier Resources Act

The 1982 Coastal Barrier Resources Act (CBRA) has proven to be a natural experiment in reducing development incentives in high-risk areas. By making over one million acres along U.S. coasts ineligible for federal subsidies, including flood insurance through the National Flood Insurance Program (NFIP), the CBRA has shifted the responsibility of managing risk entirely onto property owners. This policy has led to an 83 percent reduction in buildings per acre in CBRA areas compared to similar non-designated areas, promoting higher development densities in less risky neighboring areas. This has not only reduced flood damages but also generated significant savings for the NFIP.

Challenges and Solutions: Balancing Housing Demand and Flood Risk

Despite the clear benefits of limiting development in high-risk areas, implementing such policies is challenging during a nationwide affordable housing shortage. Coordinated efforts at local, state, and federal levels are necessary to navigate these demands. One approach is FEMA’s Community Rating System (CRS), which incentivizes local floodplain management practices exceeding NFIP’s minimum standards. While high ratings are difficult to achieve, investments in flood planning yield long-term gains through safer infrastructure and more affordable premiums.

Public-Private Collaboration and Emerging Risk Mitigation Strategies

Incentivizing public-private collaboration has shown success in enhancing flood resilience. Emerging approaches such as community-based catastrophe insurance, parametric insurance pilots, and public wildfire catastrophe models offer opportunities for fairer rates and targeted local resilience. These innovations, when paired with policies like the CBRA, can ensure appropriate risk transfer alongside substantial risk reduction.

For readers, it's crucial to understand that flood coverage is not included in standard homeowners' policies and is often necessary even if not required by lenders. Engaging in public education and stakeholder collaboration can help bridge the gap in insurance knowledge and protect more homeowners from costly flood damages.