Research on flood insurance in Massachusetts shows wealthy towns pay disproportionately low premiums.
Rich residents of coastal areas may have yet another financial advantage over poorer neighbors, according to new research from the University of Massachusetts Dartmouth.
The study finds that homeowners in more affluent Massachusetts towns tend to pay hundreds of dollars less in flood insurance premiums than those in poorer communities—despite similar levels of storm and flood risk.
The taxpayer-subsidized National Flood Insurance Program does not use income to determine eligibility, and for a host of potential reasons wealthier people end up paying disproportionately less for protection, says study author Chad McGuire.
“Those with more expensive properties receive more of a subsidy,” McGuire says.
For example, in the more blue-collar town of Fairhaven, residents pay an average premium of about $820 per $100,000 in property value, compared with $400 for residents of Edgartown on Martha’s Vineyard, widely known as a summer playground for the wealthy.
The study did not determine precise reasons for the disparity, but several factors may be at play. For one, McGuire says, many expensive older homes may have grandfathered status and be eligible for lower premiums because they were built before the current flood maps were drawn. Additionally, richer towns might be more likely to be able to afford the modifications—such as building seawalls and elevating houses on stilts—that lower risk and therefore premiums.
But those factors don’t entirely explain the study findings, says McGuire, and the way NFIP community ratings translate into federal dollars allocated is not fully transparent.
As a result of the relatively low cost of insurance, wealthy homeowners are incentivized to keep rebuilding along coastal areas—and hundreds of thousands of federal dollars can be used to repair flood damage to the same expensive vacation homes, over and over again.
“The government shouldn’t be incentivizing risky behavior,” McGuire says.
Federal Emergency Management Agency is reviewing the study results, a spokesperson told the Boston Globe.
McGuire says he and his coauthors plan to look at flood insurance data for other coastal states next.