HUD Sells Homes in Flood Zones to LMI Buyers
HUD Sells Homes in Flood Zones to LMI Buyers: The Impact of Climate Change and Structural Racism on Homeownership for LMI Buyers.
Once upon a time, Jane Smith dreamt of her very own home–a house with a charming front porch where she could visit with neighbors and watch her children play outside. She imagined a tire swing hanging from an old oak tree in and a little garden out back. She longed for her own washer and dryer and a kitchen with a dishwasher. She pictured family dinners and holidays with friends gathered in her dining room. She dreamed of her own space–an extension of her tastes, ideas, and values that could passed on to her children and grandchildren. Jane wanted to establish roots, strong and deep, a home, a haven.
When a home came on the market in the neighborhood where she grew up and within her modest budget, she dared to hope. A friend sent her the HUD Home Store listing. It had everything she wanted–a large front porch, new appliances, and a fenced back yard with space for a small garden. While it needed a little TLC, her brother was handy and was eager to help. The home needed paint and the overgrown yard needed a refresh. There were signs of water damage to the wooden porch and the steps were rotted. But there was nothing in the disclosures about flooding. It seemed too good to pass up.
Jane spent most of her savings on the down payment, urgent repairs, and moving costs. She was surprised to learn that flood insurance was required, and it pushed the mortgage payment to the maximum she could afford. Since the initial deposit was nonrefundable, she continued the process.
When a tropical storm dumped more than sixteen inches of rain, Jane’s home took on water from the resulting flood. Her paint bubbled, her garden washed out, and her basement flooded with a foot of water, destroying most of her personal items stored there and the sump pump.
Three weeks later, her home flooded again.
This is the same story many HUD Home Store buyers share. Between 2017 and 2020, HUD sold nearly 100,000 homes around the country. HUD Homes sold in flood zones were almost 75 times the rate of all homes sold nationwide in that same period (Jingnan et al). In some markets 10-15% of HUD homes sold experienced repeat flooding (Jingnan et al). And there is no federal regulation that requires HUD to disclose flood risk to potential buyers.
What does this mean?
As climate change worsens, vulnerable households and communities are at greater risk. Stronger storms. Lasting droughts. Forest Fires. Frequent flooding. Hurricanes. Rising sea levels. The working poor and people of color have the most to lose—sometimes everything.
Many of the homes HUD purchases are in low- and moderate-income neighborhoods and in communities of color hit–those often hardest hit by climate change. Our nation’s long history of redlining systematically limited home values in such areas and restricted access to better neighborhoods for people of color. These same low-income communities are also disproportionately selected to house polluting and noxious facilities. Evidence points to a pattern of disproportionate exposure to toxins among communities of color and poor, working-class neighborhoods (Here’s Life Inner City).
Housing stock also tends to be older in poor neighborhoods and homes are more likely to have lead paint, asbestos, and deferred maintenance. Combined, older housing stock and exposure to hazardous sites or materials causes property values to go down. Yet, for many, these devalued homes are the ones that are affordable—especially in today’s frenzied market.
Households in neighborhoods where HUD has sold homes tend to be poorer than other areas (Jingnan, et al). Long-term costs of climate-related damage can do tremendous harm to families, especially folks that are already cost-burdened, have minimal savings, and typically earn less than their counterparts in higher income census tracts. Catastrophic events and disasters like flooding can wipe out a family’s wealth by driving down home values in flood zones (and other vulnerable areas) or destroying homes altogether.
What to do
The Biden administration has promised to address climate change in a meaningful way from day one. And that means exploring equity in climate-related programs to be sure they serve ALL communities including poor communities and those of color. Additionally, the new Infrastructure, Investment and Jobs Act and the Build Back Better Plan call for extensive improvements from utilities to housing to transportation to clean energy in ways that make our communities more resilient. The administration must clearly define and efficiently deploy funds to organizations and people in low- and moderate-income census tracts that are prone to or that experience recurring disaster to alleviate the growing wealth gap in these vulnerable neighborhoods.
Specific to HUD, improved communication with buyers, agents, and local municipalities is crucial. Knowledge is power. Well-informed buyers can better prepare to mitigate risk, budget for disaster, and preserve savings. At a minimum HUD should provide flood maps or flood plain disclosures and any property history at listing or upon accepting an offer so the buyer is aware of the risk. Going a step further, HUD should analyze and plan for the impact of climate change on the communities where they purchase homes to determine what, if any, repairs or improvements can be made to mitigate damages and costs for future homebuyers PRIOR to close. Lastly, in areas that may experience recurring or repetitive losses, HUD should provide a seller concession to the buyer in anticipation of such damages.
Municipalities must also join the effort. Local development organizations and CDFI’s should allocate community development block grants or funds toward preservation or renovation of homes in neighborhoods that are prone to flooding or mitigation for hazards like lead and asbestos in older housing stock. CBDG funds should also be allocated and awarded to owners that have experienced damage, but do not have the funds to make repairs or enhancements to reduce risk. And finally, city organizations and development corporations should provide a list of reputable contractors and project managers that can educate homeowners on best practices for protecting their home; fair costs and prices for repairs; and to develop scopes of work within an owner’s budget.
It would be unfair to say that HUD knowingly, deliberately purchases homes in low-income census tracts that are prone to flooding and are exposed to other hazardous conditions that could impact home values. What stories and statistics do show, however, is that our history of discriminatory and exclusionary practices in building, lending, appraisals and zoning impacts low- and moderate-income families and communities of color at a disproportionate rate. Unfortunately, many ‘affordable’ homes are in LMI census tracts where there is greater risk for disaster and more exposure and hazardous materials. Homes purchased by HUD are often the same homes rejected by other lenders for lack of marketability i.e., the financial and emotional burden of damages and repairs and the high cost of flood insurance. Consequently, HUD has a limited options for affordable homeownership when it comes to location, price, and condition.
As climate change worsens, it’s crucial that HUD take action to mitigate climate-related risks to the homes they sell. Additionally, The Biden Administration, in its IIJA and Build Back Better plans, must ensure that HUD and other government agencies have the right tools and policies in place that will increase the opportunity for better, safer homeownership options that create more equitable communities for all.
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Here’s Life Inner City. “Poor Americans Face More Toxic Exposure.” HuffPost, HuffPost, 25 May 2011, www.huffpost.com/entry/poor-americans-face-more-_b_814847.
Jingnan, Huo, et al. “The Federal Government Sells Flood-Prone Homes to Often Unsuspecting Buyers, NPR Finds.” NPR, NPR, 13 Sept. 2021, www.npr.org/2021/09/13/1033993846/the-federal-government-sells-flood-prone-homes-to-often-unsuspecting-buyers-npr-.