For Communities Plagued by Repeated Flooding, Property Acquisition May Be the Answer

LINCROFT, N.J. – May 29, 2014 – (RealEstateRama) — Millions of people enjoy living near the water, but few people actually want to live in it.

When a property or a neighborhood experiences repeated flooding, costs for the property owner, the community and the state can escalate rapidly.

Flooding may impact the stability of a home or an entire neighborhood, damage or destroy personal property, impact property values and lead to injuries or loss of life. Emergency responders may risk their own lives to help residents escape rising waters.

And while the waters eventually recede, the misery caused by floods is long lasting. The impact of a storm surge may have structurally weakened formerly sturdy homes. Water-laden walls and floors may set the stage for the development of hard-to-eradicate colonies of mold that can present health risks for vulnerable residents, particularly those with compromised immune systems, children and the elderly. Repeated flooding may leave homes uninhabitable and unlikely to attract a buyer.

For all of these reasons, states and federal governments have acted to intervene in this cycle of decline by offering voluntary buyout programs to homeowners in neighborhoods that have been subject to repeated flooding.

In 2007, the New Jersey Department of Environmental Protection established Blue Acres, a permanent, flood hazard mitigation program.

Funded via a combination of federal, state and local grants, the Blue Acres program established a protocol for purchasing homes from willing sellers in communities subject to repeated flooding.

Once purchased by the municipality, the homes are demolished and the property is designated as open space.

Property acquisition is the most permanent form of flood hazard mitigation.

In New Jersey, federal funds from FEMA’s Hazard Mitigation program and from the U.S. Department of Housing and Urban Development combine with state and municipal funding to underwrite the property acquisition program.

For eligible communities, FEMA typically funds 75 percent of the cost of property acquisition with the municipality and state contributing the remaining twenty-five percent.

In the case of Hurricane Sandy, FEMA and the state of New Jersey agreed that FEMA will cover one hundred percent of the costs of property acquisition as permitted under federal regulations.

FEMA does not buy houses directly from homeowners. Buyout projects are initiated and administered by local and state governments with grant funding support from FEMA.

Additional federal funding may also be provided by the Community Development Block Grant program administered by HUD.

To qualify for federal funding for the acquisition of flood-prone properties, a state must create a flood mitigation plan, which is then submitted to FEMA for review and approval.

In its mitigation plan, the state identifies communities that have experienced losses due to repetitive flooding and, once the plan is approved by FEMA, notifies those communities that funding for property acquisition may be available.

Once a community has been notified that funds may be available for property acquisitions in their town, community meetings are held to discuss the advantages and disadvantages of the program and to explore any issues or questions that arise regarding the potential buyouts.

Homeowners in eligible communities who are interested in having their property acquired by their community must file a Blue Acres application for a buyout and follow the steps outlined in the process to secure an offer on their property and begin to move forward, leaving their flood risks behind them.

The program is completely voluntary; no homeowner is required to sell their property or is forced to move because their home is located in an area subject to repetitive flooding.

Homes that are determined to be eligible for buyouts are purchased by the town at the fair market value of the property prior to the flood. The fair market value is determined as the result of an appraisal conducted by a certified appraiser using sales of comparable homes sold before the flood event.

Homeowners who disagree with the appraisal have the right to appeal within 30 days following a written offer.

The municipality must receive the property free of any mortgages, liens or outstanding taxes. Any debt connected to the property must be paid off and the amount of that debt is deducted from the amount paid to the property owner before the transfer is complete.

The State will conduct title searches for each property to verify ownership and to identify any issues that prevent the homeowner from giving the state clear title to the property. Any debts outstanding on the property are paid off through the proceeds of the sale with the remainder of the proceeds being paid to the property owner.

Once a property has been purchased through the Blue Acres program, the home is demolished and the land becomes public property, designated via deed-restriction as open space.

In the aftermath of Hurricane Sandy, the NJDEP announced plans to use $300 million in federal disaster recovery funds to purchase approximately 1,300 homes in areas subject to repeated flooding. The properties to be acquired include 300 homes in the Passaic River Basin, in Manville and in other tidal areas of the state.

To date, FEMA has obligated $73 million of the anticipated $300 million for property acquisition initiatives in New Jersey.

The first post-Sandy buyouts in New Jersey took place in the towns of Sayreville and South River in Middlesex County, which were inundated by storm waters when the Raritan and South Rivers overflowed their banks and a storm surge rose from Raritan Bay. The first demolition took place in Sayreville on March 13, 2014.

In accordance with the funding agreement between the state and FEMA, FEMA’s Hazard Mitigation Grant Program is providing 100 percent of the funding for the initial round of buyouts in South River, Sayreville and Woodbridge.

Approximately 198 properties have been acquired and demolished or are pending acquisition and demolition in Woodbridge. In South River, 77 properties are approved for acquisition and demolition, bringing the total of purchased homes in so far to 273.

Forty-one homeowners in Old Bridge Township and 9 homeowners in Lawrence Township have submitted buyout applications and are awaiting approvals.

The state ultimately aims to purchase 1,300 post-Sandy properties to mitigate flood risk by establishing permanent, public open space and to get homeowners in flood-prone areas permanently out of harm’s way.

For more information on the New Jersey Blue Acres program, visit http://www.state.nj.us/dep/greenacres/blue_flood_ac.html

To view a video on the Blue Acres program at work in Sayreville, N.J., go to http://www.fema.gov/media-library/assets/videos/93670

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http://www.fema.gov/disaster/4086/updates/sandy-one-year-later

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