Federal Flood Insurance.

• Author: Van Doren, Peter

"Efficient Adaptation to Flood Risk," by Winston P. Hovekamp and Katherine R.H. Wagner. SSRN Working Paper no. 4344415, January 2023.

Federal flood insurance is available only in communities that have agreed to land-use controls that limit construction in a high-risk area--a so-called " 100-year floodplain," known officially as a Special Flood Hazard Area. New construction must be elevated so that the structure's first floor is above the high-water level--the Base Flood Elevation (BFE)--predicted to occur with 1 percent annual probability. Also, existing properties that are "substantially damaged or substantially improved" must be rebuilt with elevation above the BFE. Federal regulation defines "substantially damaged or substantially improved" as repairs or alterations that equal or exceed 50 percent of the market value of the structure before damage or renovation occurred.

Are the elevation requirements cost effective? This paper examines the universe of flood insurance contracts in-force...