The Cost and Affordability of Flood Insurance in New York City

RAND conducted this study to help the City of New York better understand flood insurance affordability in the context of potential policy changes on the horizon. Namely, the adoption of updated Flood Insurance Rate Maps (FIRMS) that will change the total number of structures that are deemed in high-risk areas, phasing out of pre-FIRM rates that permit older buildings to be exempt from flood insurance requirements, and changes that would no longer allow “grandfathering” that currently authorize certain homes to hold premiums based on old flood zones. Using flood vulnerable areas in New York City as the study area, this paper answers four questions: 1) To what extent is purchasing flood insurance burdensome for households living in one- to four-family homes? 2) How might flood insurance premiums change? 3) What effect will flood insurance premium increases have on households and communities? And 4) What are some promising options for a program that helps reduce the impact of higher flood insurance premiums in the study area and how much would they cost?

Consider how to assess flood-insurance related housing-cost burdens in your own community to better understand what flood insurance policies might promote equity and resilience. 

The researchers found that an estimated 43% of homes in the study area are covered by flood insurance with policy holders paying an average of $1880 for owner-occupied one- to four-family homes in high-risk zones and $530 outside the high-risk zone.  Using a ratio of mortgage principal and interest, property taxes, and property insurance payments to income, the researchers assessed insurance affordability. They found that flood insurance is burdensome for about 11,000 households, or 25% of one-to four-family properties in the study area. This includes 64% of extremely- or very low-income households and 41% of low-income households.

Looking forward, the proposed flood insurance rate map changes and the elimination of grandfathered and pre-FIRM rates will increase the percentage of housing-burdened households to 33%. Additionally, the researchers find that increases in flood insurance could decrease property values by $10,000 to $100,000. This has important implications for the City’s property tax base, which is likely to decrease by $22 million, based on their estimates. It could also increase mortgage default rates, especially within high-risk zones.

Despite these findings, the researchers identify several promising options in Chapter 6 – three options that subsidize flood insurance in different ways, a fourth that makes flood insurance premiums more affordable by subsidizing structure specific mitigation measures (e.g. installing flood vents, raising machinery, basement infill, elevation) and a fifth option that combines mitigation assistance with a premium subsidy (see table S.3 below).

A full summary of the pros and cons of each program can be found in Table 6.19. Overall, the subsidy programs will cost between $12 to $33 million per year, and will vary in the extent that they reduce housing-burden based on how narrowly or broadly they are applied. Under the current FIRM, the mitigation measures proved disappointing because mitigation measures did not prove cost-effective, meaning few housing-burdened households would be eligible.  With the new rate maps, however, it would become cost-effective to elevate more homes. The researchers also found that combining an income-based premium subsidy with mitigation measures could lower the cost to the government, but only if low-income households continue to live in the property for ten years after the start of the program.

Other findings of note include:

  • Flood insurance take-up rates increased substantially in New York City following Hurricane Sandy. This likely reflects 1) heightened awareness of flood risks, 2) requirements to purchase flood insurance to receive federal assistance, and 3) outreach initiated by the New York City government. The researchers believe that take-up rates may fall again as the memory of Sandy fades and three-year requirements end. 
  • The paper also looks at how much 8 inches of sea level rise would increase premiums in the study area. They find that premiums would increase 10% from the full-risk rates under the proposed updated FIRM.
  • Chapter 4 compares five different neighborhoods within the study area. Canarsie, a working- and middle-class neighborhood in Brooklyn, had the highest percentage of low-income households and insurance burdened household. The Rockaways are particularly exposed to larger premium increases when the updated FIRM is adopted.

The paper provides an in-depth overview of the methodology the researchers employed, a summary of the information they collected from residents, and an explanation of how the researchers determined flood insurance take-up rates, insurance affordability, and housing-burden. The paper describes which coverage options most NYC residents in the study area chose (e.g. deductible and level of coverage). It also details how changes in grandfathering policies and the proposed new FIRM were factored into their analysis.


Publication Date: 2017

Resource Author(s):

  • Lloyd Dixon
  • Noreen Clancy
  • Benjamin Miller
  • Sue Hoegberg
  • Michael M. Lewis
  • Bruce Bender
  • Samara Ebinger
  • Mel Hodges
  • Gayle M. Syck
  • Caroline Nagy
  • Scott R. Choquette

Related Organizations:

  • RAND Corporation


Resource Category:

Resource Types:

  • Academic research paper
  • Policy analysis/recommendations

States Affected:


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