Blueprint of a Buyout: Blue Acres Program, NJ

NRDC’s new report Going Under: Long Wait Times for Post-Flood Buyouts Leave Homeowners Underwater highlights the long timelines of FEMA-funded home buyouts. During a buyout, local or state governments purchase flood-damaged properties from willing sellers at pre-flood values and preserve the land as open space. But once a property is included in a request for FEMA funding, homeowners can be kept in limbo for years, waiting to find out if their homes will be purchased.

In the aftermath of Hurricane Harvey, Roy Wright (FEMA’s deputy administrator for mitigation and insurance) said, “I’m working with my team and lawyers on ways I can move [buyouts] to the front. The point is, I’m not going to pay someone to redo their house, then re-buy it.” But long wait times mean that homes are often repaired and rebuilt over and over, even when the residents would prefer to move—wasting time, money, and an opportunity to reduce risk, not to mention adding to the stress and trauma of flood survivors.

In this blog series, we’ll take a closer look at some existing buyout programs and how they are affected by these long timelines. 

The New Jersey Department of Environmental Protection (NJDEP) has been conducting post-flood buyouts for nearly 25 years. Many buyout projects are implemented by local governments, like cities or counties. But as a state-run effort, the Blue Acres Buyout Program has been able to assist residents in communities that may not have been able to complete buyouts on their own.

Blue Acres dates back to 1995, but activity expanded sharply after Hurricane Sandy in 2012. As of September 2019, the program has purchased approximately 1,000 properties (about 700 since Sandy) and plans to acquire hundreds more using a mix of state and federal funding. Blue Acres buyouts take 6 to 12 months from start to closing, depending on the homeowner’s situation and needs; after closing, it will take another 6 to 12 months to complete demolition. This timeline is substantially faster than most FEMA-funded buyouts—but it has required extensive work to reach this point.

Fawn McGee, director of the Blue Acres Program, says that one of the biggest hurdles for communities running buyout programs is preparing the required benefit-cost analysis (BCA), which is used to demonstrate the cost-effectiveness of the project. If acquiring a property costs up to $276,000, FEMA doesn’t require a BCA because it’s automatically assumed that the buyout is cost-effective. However, costs are higher in many areas of New Jersey, where the statewide median home value is (as of September 2019) nearly $330,000. This means that the BCA must be determined for each individual property, a prospect that McGee calls “outrageously daunting” for local governments.

Another challenge is the amount of time it takes for families to find new housing. With high prices and housing already in short supply in many areas of New Jersey, McGee says that finding new housing can add months to the process. For this and other reasons, the program sees a high attrition rate: McGee says that her team prepares documentation for twice as many properties as they expect to purchase, so that they can still move forward if half of the participants drop out. The Blue Acres team has also started providing relocation assistance to participants who have trouble finding a new home in a suitable location—something else that is out of reach for many municipalities.

McGee feels that buyouts need to become a more widely adopted strategy, but this won’t be the case unless they happen more quickly. Currently, National Flood Insurance Program payments arrive long before buyout funding, which means people begin rebuilding months before they are ever offered a buyout. Once a person is done rebuilding, they are less likely to be interested in a buyout. If buyouts could be offered much more quickly, as quickly as flood insurance claims, a buyout would be more attractive and more feasible, giving homeowners another option when deciding what to do after a flood. “We’ve got thousands and thousands of people that are on the National Flood Insurance Program’s repetitive loss list and severe repetitive loss list,” McGee told PBS NewsHour, referring to the most flood-prone properties insured under the NFIP. “So there’s more people that we can get to that are out there in these affected areas.”

The Blue Acres team can leverage NJDEP’s buyout experience—as well as its staff, its strong relationships with funding agencies, and other resources—to make the buyout process proceed faster and more efficiently. But many local governments who are implementing buyout projects don’t have the same capacity. The solutions outlined in the Going Under report, like funding buyouts directly through the National Flood Insurance Program, could help residents of other areas access buyout assistance when they most need it.

Special thanks to Fawn McGee for her input on this blog post.