Floodplain Buyouts: Federal Funding for Property Acquisition

Floodplain Buyouts: Federal Funding for Property Acquisition

INSIGHTi

Floodplain Buyouts: Federal Funding for
Property Acquisition
Updated May 28, 2024
Flooding is the most frequent natural disaster in the United States and experts expect effects to intensify
in the future. A floodplain buyout is a property acquisition in which a government agency purchases
private property, relocates or demolishes any structures on it, and preserves the land as open space.
Buyouts offer one way to reduce flood risk. Unlike other approaches to flood mitigation, buyouts
eliminate future losses by removing properties from areas at risk of flooding. Buyouts can also improve
stormwater management, restore and conserve natural floodplain functions, and provide other ecosystem
services.
Federal Funding for Buyouts
Flood buyouts can be funded by several federal programs:
• Any of the Federal Emergency Management Agency (FEMA) Hazard Mitigation
Assistance (HMA) grant programs: the Hazard Mitigation Grant Program (HMGP), the
Building Resilient Infrastructure and Communities Grant Program (BRIC), the Flood
Mitigation Assistance Grant Program (FMA), and the Safeguarding Tomorrow Revolving
Loan Fund Program;
• National Flood Insurance Program (NFIP) Increased Cost of Compliance Coverage;
• Department of Housing and Urban Development Community Development Block Grant
Disaster Recovery (CDBG-DR) program;
and under some circumstances:
• FEMA Public Assistance;
• Department of Agriculture Emergency Watershed Protection Program;
• National Oceanic and Atmospheric Administration land acquisition projects;
• Land and Water Conservation Fund;
• United States Army Corps of Engineers flood risk reduction projects; and
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• Department of Interior Voluntary Community-Driven Relocation Program.
FEMA Floodplain Buyouts
Although there is no database that identifies all federal funding for floodplain buyouts, some research
indicates that the majority of buyout funding has been provided by FEMA. FEMA-funded buyouts are
entirely voluntary and property owners cannot be forced to participate. In the case of property acquisition
and demolition, a local or state government purchases flood-prone land and structures and demolishes the
structures. Alternatively, state or local governments purchase land and the property owners relocate to
another site. If the new location is in a Special Flood Hazard Area (SFHA), the structure must meet the
community’s floodplain management ordinances. All FEMA-funded projects must comply with open
space and other regulations in 44 C.F.R. Part 80. After the date of property settlement, no federal entity
may provide disaster assistance to households or businesses for any purpose with respect to the property.
The property is not eligible for NFIP coverage for structural damage after the date of settlement.
Considerations for Congress
Length of Time for Buyouts
One of the biggest considerations for homeowners is the speed of the buyout. Some studies show that the
average FEMA HMGP buyout project takes over five years from the start of the associated disaster to
project closeout, although property acquisition typically occurs before a funding program is closed out.
According to FEMA, the average time to obligate HMGP funding is 19.5 months, with 80% of
acquisitions approved in under two years and 93% in three years or less (Figure 1). The average time to
obligate FMA-funded buyouts is 16 months.
Funding may be insufficient to buy out all of the properties requested, and volunteers on waiting lists may
return to their flooded homes as they wait for a buyout. If they repair their flood-damaged house for
habitability while waiting, they may no longer wish to relocate. Longer buyout timelines may restrict the
opportunity for lower-income households to participate.
Challenges for Local Governments
Buyout programs may be controversial, even though they may reduce long-term flood risk. Buyouts may
reduce state and local income from property taxes, reduce housing stock, cause a decline in real estate
values in neighborhoods with large numbers of vacant lots, create fears that low-income communities are
being removed, or fragment communities through resident displacement and loss of neighborhood
cohesion. The local government is responsible for maintaining parcels of bought-out land and buyout
programs generally do not include funding for future design, maintenance, or use of bought-out land.
Nonfederal cost-share requirements and the cost of maintaining open space and may prove to be a
disincentive, particularly for small or disadvantaged communities.
With voluntary buyout programs, some properties are acquired and converted while others are left to
remain, creating a “checkerboard” effect with some properties surrounded by vacant or underutilized
parcels. This may create numerous problems, including blight, community fragmentation, difficulty with
providing municipal services, and inability to restore full floodplain functionality.
For these reasons, buyouts are often a politically unpopular option unless there is a particularly
catastrophic event that changes people’s willingness to move and creates unified state and local support
for relocation.

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Policy Options
There are a number of policy options available to increase participation in buyout programs. Agencies
could dedicate a special round of funding for buyouts, offer a higher federal cost-share for buyouts that
relocate contiguous properties, or provide greater assistance to low-income communities for post-buyout
maintenance. Homeowners are generally offered the pre-disaster fair market value of the property.
Programs could incentivize participation by offering higher payments to low-income residents or
encouraging relocation in a lower-risk area.
One option to speed up buyouts could be to fast-track funding to be available immediately after a disaster
for buyouts. Local governments could be reimbursed up to a specified percentage of total federal funding
if they undertake buyouts immediately after a disaster, or an agency could establish a pre-approval
process. States and communities could pre-approve or guarantee buyouts to interested homeowners before
a flood, or acquire homes and rent them back to owners or tenants for as long as the property remains
habitable. For example, the federal government has used life estates to acquire property for its own use,
such as national parks, allowing homeowners to remain for the rest of their lives or until they choose to
leave. A similar approach could be used to encourage flood buyouts.
Federal agencies usually do not track the new locations of households after a buyout, so it is typically not
known whether households have moved to a less vulnerable location. Buyout programs could provide
more assistance in the relocation process and greater emphasis on developing affordable housing in
nonvulnerable locations.

Figure 1. FEMA’s HMA Property Buyouts

Source: Provided by FEMA to CRS, April 8, 2022.

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Author Information

Diane P. Horn

Specialist in Flood Insurance and Emergency
Management

Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff
to congressional committees and Members of Congress. It operates solely at the behest of and under the direction of
Congress. Information in a CRS Report should not be relied upon for purposes other than public understanding of
information that has been provided by CRS to Members of Congress in connection with CRS’s institutional role.
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