Journalism in the Public Interest

After Sandy, Government Lends to Rebuild in Flood Zones

A ProPublica/WNYC analysis shows the federal government has approved $766 million to rebuild in areas prone to flooding.

Piles of debris line portions of Route 35 in Toms River N.J. after Hurricane Sandy (AP Photo/Wayne Parry, File)

This story is being co-published with New York public radio’s WNYC.

If Staten Island’s Great Kills Marina Café is able to reopen this spring after Sandy ripped apart its interior – blowing out windows and punching through walls – it will be thanks to assistance from the federal government.

The Small Business Administration has approved the restaurant for a disaster loan of almost $1 million.

There’s just one problem: Newly drawn FEMA flood maps show the cafe is at high risk of flooding again, raising the question of whether it makes sense to rebuild there or move elsewhere.

The cafe is not alone.

A WNYC and ProPublica analysis of federal data shows at least 10,500 home and business owners have been approved for $766 million in SBA disaster loans to rebuild in areas that the government now says could flood again in the next big storm. The data, which shows loans approved through mid-February, was obtained via a Freedom of Information Act request.

More loans could be going to flood-prone areas. The analysis did not cover Long Island or Connecticut.

The loans require borrowers to get flood insurance, which in turn could encourage some to rebuild properties to be more flood-resistant. However, for many owners there’s no requirement they raise their properties to the heights FEMA recommends.

The result: the federal government is helping people rebuild despite the risk that flooding will again destroy the properties.

The SBA says it’s not their job to assess whether it’s smart to build in flood-prone areas.

“Our mission is to help these homeowners and business become whole again,” said Carol Chastang, an SBA spokeswoman. “We really aren't in a position to tell people where or where not to rebuild.”

Such a hands-off approach worries a diverse coalition of advocates -- including conservative groups, environmental organizations, insurance associations and housing coalitions. These groups are urging government at all levels to change the way it builds in disaster-prone areas and insures such properties.

Environmental groups like the National Wildlife Federation say the best flood protection are wetlands and to leave stretches of the coast undeveloped.

“Ideally we’re going to help people move away from the flood zone and not give them assistance to rebuild exactly as is,” said Joshua Saks, the federation’s legislative director. “But we recognize it’s a very personal decision, it’s a local decision.”

For Sam Corigliano, the decision is obvious. Corigliano opened the Great Kills Marina Café in 1980 and built it into a neighborhood fixture over the years.

“We’ve been here 32 years, had 32 years of good luck, and good fortune and laughs. We’ve had parties here, christenings, family events, a lot of happy times. We had one bad day,” Corigliano said. “You don’t walk away from one bad day.”

The program

Disaster loans are one of the main tools the federal government has to help homeowners, nonprofits and business owners after something like Sandy. The Small Business Administration provides as much as $200,000 for damaged homes and $2 million for businesses. In rare cases, homeowners might qualify to have a portion of their mortgage refinanced with an SBA loan.

The loans carry low interest rates – as little as 1.7 percent for home loans and as low as 4 percent for business loans -- and can be repaid over 30 years.

As of mid-February, the SBA approved more than 21,500 disaster loans worth $1.5 billion for Sandy-related damage, according to a copy of the loan database WNYC and ProPublica obtained through a Freedom of Information Act request. The SBA estimates it could ultimately approve as much as $2.5 billion worth of Sandy-related disaster loans.

The loans are an important tool the government uses to help stabilize an area’s tax base, said James Rivera, associate administrator in the SBA’s Office of Disaster Assistance and the official in charge of the disaster loan program.

“It’s good government. I mean, basically it’s what the private sector won’t do,” Rivera said.

The SBA also checks to make sure applicants have an ability to repay the loans. Government loan officers will check an applicant’s credit history, finances and collateral. The SBA approves about 52 percent of applicants, Rivera said.

Field inspectors assess damage and determine the maximum amount the SBA will loan.

The SBA disburses the money like a construction loan – in chunks as work is completed – minus whatever a borrower’s insurance covers.

The flood zone

At the same time the SBA was approving disaster loans, the Federal Emergency Management Agency was releasing new “advisory” flood zone maps.

Approved maps ultimately determine flood insurance rates and help builders decide how high to make their properties. The existing maps that govern building along the coast are from 1983.

The new preliminary maps show FEMA thinks far more properties throughout the region are at risk of flooding. FEMA also says many of those properties already in flood zones should be raised even higher to avoid future damage.

FEMA rushed to release the maps to ensure property owners had the data as they start to rebuild, said Michael Byrne, FEMA’s coordinating officer for New York operations.

“It’s the best science we’ve got. We certainly hope people will take it seriously,” Byrne said.

But the maps won’t become final for as long as three years. And it’s up to local governments to decide if they want to require higher elevations before then.

New York City requires “substantially” damaged properties to rebuild to the existing flood elevations. But in many cases that’s not as high as FEMA now recommends.

Corigliano, owner of the Marina Café, said he’s not raising his restaurant. It would cost too much and take too long.

“You’re probably talking about maybe two years of paperwork. You’re talking Army Corps of Engineers to sink piles and so on and so forth,” he said.

There is no data yet on how many property owners who received a loan will actually rebuild and, of those, how many will raise their properties to withstand a future flood.

Of the loans made in New York City, 83 percent went to a property in areas FEMA says are at risk of flooding, the data shows. In New Jersey 71 percent went to a proposed flood zone.

The recipients

The biggest loan approved as of mid-February was a $1.5 million loan to the Fairfield Beach Club, a private beach and tennis club on the shore of the Long Island Sound in Connecticut. FEMA has not yet released new maps for Connecticut, but the effects of Sandy certainly suggest the club is at risk.

The club’s century-old wood buildings were badly damaged by surging waters, including some that were shifted on their foundations, said Arthur McCain, a member of the club’s finance committee.

McCain said the club will try to raise buildings to help protect them from a future flood. But there’s only so much the club can do.

“If we really wanted to avoid future damage we’ve got to close the club and move inland two or three miles.” McCain said.

Families have enjoyed the beach club since it opened in the late 1880s, he added. And he said if the club were to close it would just leave a blighted piece of land.

McCain also pointed out that the SBA money is a loan and the government will make money off the club, which also pays a considerable amount for flood insurance.

The loans, however, can cost the government.

The default rate on disaster home loans is about 10 percent, and it’s about 20 percent for some business loans, according to the SBA. The administration estimates that it costs taxpayers 11 cents for every $1 of disaster loans.

“These loans do not come without risk to taxpayers,” said Pete Sepp, executive vice president for the National Taxpayers Union. “We need to have a policy that carefully considers whether rebuilding in flood prone areas makes sense and whether such building ought to be encouraged by government or at least abetted by government through the use of aid and loans.”

But locals like Nicholas Dorman don’t want to leave their homes. Dorman, a fireman, bought his home in Staten Island in 2006. It was his first and has been home to his young family.

The house is now leaning after he says the surge smashed boats against the property. He was approved for a $192,100 disaster loan from the SBA. He’s not sure it will be enough and hasn’t even thought about how high he might build. But he wants to find a way.

“It meant everything to us. I had my pension in there. Everything I had into that house. To me it was gorgeous,” Dorman said.

Robert Lewis is a reporter at WNYC.

Stephen Reader contributed reporting.

Correction: An earlier version of this story said FEMA had not completed maps for many areas, including Long Island. That was incorrect. FEMA completed maps for Long Island in 2009.

“The default rate on disaster home loans is about 10 percent, and it’s about 20 percent for some business loans, according to the SBA. The administration estimates that it costs taxpayers 11 cents for every $1 of disaster loans.”  Isn’t govt great!  This country is swimming is so much debt and easy money.  I love the firefighter, who spent his entire carreer on the taxpayer dime, building the house with his taxpayer pension, and now collecting a taxpayer bailout to rebuild his home in a flood zone.  What a great country!

If you rebuild in a flood zone you are an idiot.  If the taxpayer has to pay for your structure teice we are an idiot.

I’m sorry, but if I’m paying for you to rebuild, I DO have a say in where you build it.

I have no problem if someone wants to build in a flood zone… BUT they need to build with their own money, not borrow it… and they need to sign a form that states that they know they are doing something stupid and will NEVER seek or accept any government money related to flood damage… And then if they want to build a paper house by the ocean, let them.

@Kevin,@nate… it’ s a loan, you’re not paying for it and you’re not getting any benefit to the interest either.
@joe, you’re right those loans are expensive but in the typical government’s way I’m willing to bet that the credit worthiness of the recipients will not be a factor and many will just default.

No public money should ever go into a flood or earthquake zone.  New Orleans, Galveston, Charleston, San Francisco, along rivers, and all the other places should be on their own.  These people knew their properties could be destroyed when they built or bought them in dangerous places.

Susan Fennewald

March 6, 2013, 3:57 p.m.

I live in Galveston.  There are so many bizarre aspects of flood and hurricane recovery - you’re just getting started. 

The whole beachfront problem just makes me crazy.. but more mundane things are crazy too.

In Galveston, our history is that when there’s a storm and flooding - you raise your house. In 1900, they raised the whole island.  So after Ike, some people who had flood insurance and were flooded wanted to raise their homes above the Ike level.  But Fema and the flood insurance folks wouldn’t pay for it - because this was a once in a hundred year event and so they wouldn’t have to pay out for another 100 yrs so the cost/benefit didn’t meet the financial criteria.  And Fema and the flood insurance folks didn’t issue new maps for years - which means that those whose flood insurance should pay to have their homes elevated above the new flood level, would be finished repairing their homes before the new regulations set in.  If Fema and the flood insurance folks had issued new maps and quickly raised the base flood elevation, then many people who had paid flood insurance premiums for years would have been able to use insurance money to raise their homes higher.

Actually, when the new maps came out - many of the flooded homes still had the same base flood elevation as before.

Also, you may think we’re crazy to live here, but actually we have one of the highest concentrations of historic homes in Texas.  Many and most of the houses here have survived numerous hurricanes and floods.  It depends a lot on how things are built - and houses were built differently in the old days.  But it does take help to recover in the short term.  And Fema was great in the short term. But the Congress-approved hurricane recovery was a disaster in the long term. So much money was and is being wasted.  We’re still fighting it out and trying to get our water pump stations elevated and its more than 4 yrs since Congress approved the money.

(By the way

I just love the contempt for victims being exhibited here. Smug assessments of what you ‘know’ is right. Let’s forget about fighting to advance the Tea Party agenda and help these folks get back on their feet in the community where they spent their lives.

@ Jim, that’s super simplistic. Think about it. You want all the hundreds of millions of people living in flood and earthquake zones to move to say, your town? So they can compete for water and land? The coastal port cities are very important economic engines of our country, sites of commerce and innovation. The interior and the coasts are interdependent. Nowhere is completely safe from natural disasters, but that’s what insurance is for. The problem is that climate change has increased the risk, but we don’t know exactly where and by how much. The only real solution is to slow down climate change.

If you think these federal loans are abad idea, just think that NJ Gov. Christie wants to give business’ GRANTS in the same hazardous locations along the shore.

(all while thousands of people remain homeless or live in hotels)

There are a couple of verses in the Bible that cover this pretty well. Matthew 7:25-27.  “It rained hard, the floods came, and the winds blew and hit that house. But it did not fall, because it was built on rock. Everyone who hears my words and does not obey them is like a foolish man who built his house on sand. It rained hard, the floods came, and the winds blew and hit that house, and it fell with a big crash.”
And the oceans will rise and the winds will continue to howl. And these people will continue to ignore the lessons that are taught to them.

So you’re saying that because of one Bible verse, hundreds of thousands of people should be thrown out of their houses with no compensation because they happen to live in flood zones? That’s really sick. Typical smug Tea Party Republicans who get their jollies from watching “foolish” people suffer. But try this Bible verse on for size: Love thy neighbor as thyself.

Disaster relief is fine and dandy, but what the government is doing is setting the stage for future disasters.
  The restaurant that had been there 38 years won’t get another 38 years before sea levels rise 6 feet or more, putting them underwater in every minor storm.
  I guess since we blew all that money on a futile seawall for New Orleans, every other at-risk community thinks we can do the same for them.
  Comparisons to earthquake and fire areas are valid.  The government should make the requirement that homes be made with earthquake proofing (most already are in CA) and fire-resistant or outright non-combustible.  Flood zone homes must be raised above the 100-year mark or not be approved for rebuild.  What if in the future those homes and businesses get flooded again, but because they weren’t raised people die in them?
  Does anyone give a sh!t about the future or is it going to be more of the same:  just live-for-today, I-got-mine-screw-the-grandchildren?

Of course anyone claiming that taxpayer monies shouldn’t be spent in flood- and earthquake-prone homes is saying the same thing about spending taxpayer monies in those states which are hit by hurricanes or tornadoes.

Of course anyone claiming that taxpayer monies shouldn’t be spent in flood- and earthquake-prone <strike>homes</strike> states is saying the same thing about spending taxpayer monies in those states which are hit by hurricanes or tornadoes.

I’d think - since the rule seems to be that one earthquake or one flood is evidence sufficient to say “prone” for those who are against spending taxpayer money on states that are earthquake- or flood-“prone” - that a state that has one or more tornadoes per year is likewise tornado-“prone” and so should be cut off from Federal spending.

David de Kok,
  The Bible did not provide disaster insurance.
  We do. But with the insurance or relief payments (floods, earthquake, SBA, etc.) should come reasonable conditions. That goes for floodplains, tornado shelters and roof tie-downs (which mitigate costs not for all, but for buildings not in the direct path) and earthquake reinforcement.
  I invested in reinforcement (foundation tiedowns, internal cross bracing below the house, bracing a brick chimney, and an automatic gas shutoff valve) and had minimal damage in the 1989 Loma Prieta quake, just a crack in the brick fireplace and no insurance claim. 
  I should be able to expect similar care from others who share the commons.

Living “a drive out for lunch” to a lot of the similarly-affected areas, I’ll make a couple of small points, which are just my view.

First, if the government (FEMA) says it’s a flood zone, then the government (SBA) shouldn’t be encouraging people to build there.  I don’t care if the people do or don’t, since it’s their land, and I do want these areas rebuilt to shore up the communities and the tax base.  But just like the government doesn’t help people on welfare buy cigarettes, they shouldn’t be helping people build in flood zones.  Either it’s dangerous or it’s safe.  It can’t be both.

(Aside:  If you think the flooding from Sandy was a one-time thing, and those areas will never be flooded again, you might want to check today’s news from the area.  Or maybe you don’t.)

Second, the exception the the previous point is if they’re building to withstand a future flood.  I don’t know if they are, but I’d support helping the flood-prone communities withstand the floods.  It’s common sense to keep the land inhabited, by any measure.

Third, and here’s where I’m going to be a complete jerk about things, I don’t know much about the flooded New Jersey communities, but on Long Island, you don’t find many poor people living on the shore.  The North Shore of Long Island is still very much the land of the Vanderbilts and the families Fitzgerald fictionalized for The Great Gatsby.  I’m a little less amped about helping them get their lives back together, when you can walk two or three miles into what amounts to a crack house that didn’t have the luck of getting flooded.

Since some of you support a draconian approach that would ruin the lives of hundreds of thousands of people, let’s expand it, because what’s fair is fair. Why should people who are foolish enough to buy houses made out of wood, or containing any flammable materials at all, be allowed to have fire insurance? After all, that raises the rates that those of us in cinder-block houses with metal roofs and metal furniture, pay for our insurance. If they burn, raze them, and send the families to a homeless shelter if they’re reckless enough not to have saved a hundred thousand dollars for an emergency. If you don’t agree, perhaps we can have a sensible discussion about flood insurance free of Tea Party rhetoric and smug contempt for the less fortunate.

It’s easy to say “Don’t rebuild in a flood zone,” when it’s someone else’s home that you’re talking about not rebuilding.  But what if that were your town?  Your neighborhood?  Your street?
Let’s not fool ourselves.  We are all susceptible to natural disasters in some shape or form.  If it’s not hurricanes, it’s earthquakes.  If it’s not earthquakes it’s forest fires.  If it’s not forest fires it’s blizzards.  The list goes on.  Are we going to tell people that if their town is anywhere near an active fault line, we won’t rebuild should an earthquake hit?

This article is part of an ongoing investigation:
After the Flood

After the Flood: The Challenge of Rebuilding as the Climate Changes

In the aftermath of Hurricane Sandy, ProPublica is investigating the response to disasters as the climate changes.

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