The first thing Larry McCanney fell in love with was the tree in the front yard. It cast shade on the porch of a house that, if he were honest, needed some work. But McCanney is handy, the price was right and the location was perfect, just a couple of miles from his childhood home in Burlington, N.J.
“We just kind of wanted to get our family started, and it was affordable for us,” McCanney says. “I’m still paying college loans off 11 years later, [and] we wanted to ensure that we were purchasing a place that, should I lose my job or if [my wife] lost her job, we wouldn’t be out of a house in two months’ time.”
There was one unexpected thing about the house: The seller was listed as the secretary of housing and urban development.
The homes that the Department of Housing and Urban Development (HUD) sells are foreclosures. The previous owner was unable to pay their federally insured mortgage, and the house was seized by a bank and turned over to HUD. Only a small percentage of foreclosed homes in the United States end up being sold by HUD, but the numbers add up. Between 2017 and 2020, HUD sold nearly 100,000 homes around the country.
Like McCanney, many buyers are first-time homeowners excited to find a house they can afford. There is a nationwide shortage of affordable homes, especially for low-income families. Providing safe, affordable housing is HUD’s mission.
But an NPR investigation finds that the homes HUD sells are disproportionately located in flood-prone places, compared with Zillow records of all homes sold in the United States. The agency does not fully disclose the potential costs and dangers of living in harm’s way, and some of these transactions have happened as local governments are buying out properties in the same areas to mitigate flood risk.
NPR analyzed tens of thousands of homes sold over a nearly four-year period and found that while HUD sells flood-prone homes in almost every state, a handful of states stand out as hot spots.
The findings include:
Homes that were sold by HUD between January 2017 and August 2020 are in federally designated flood zones at almost 75 times the rate of all homes sold nationwide in that period.
Louisiana, Florida and New Jersey stand out as hot spots. More than one-fifth of homes sold by HUD in Louisiana were in flood plains. In Florida, it was about 12% of homes sold by HUD, and in New Jersey, 7%. In comparison, Zillow’s records show that 0.1% or less of all homes sold in these states are in flood zones.
In many cases, buyers of HUD homes get less information about flood risk and the cost of flood insurance than if they were to purchase the house from a private seller.
Neighborhoods where HUD sold homes have lower median household income on average than areas where HUD did not sell homes.
Interviews with people who bought homes from HUD in multiple states make it clear that many buyers don’t learn that their houses are in an official flood zone until after they’ve made an offer or paid a nonrefundable deposit. And even if a house doesn’t flood immediately, the cost of managing flood risk can be significant.
There is no federal regulation requiring HUD to disclose flood risk to potential buyers. Most buyers find out their new house is prone to flooding when they are notified that they must purchase flood insurance, which happens so late in the homebuying process that it is often too late for families to back out of the purchase.
That’s what happened to McCanney. “That’s the one disappointment in this area. We’re in a flood zone, so we have to pay pretty expensive flood insurance,” he says. “I didn’t really take that into account when we first bought it.” This summer, a rainstorm flooded the park across the street and sent a foot of water into McCanney’s basement after his sump pump broke. McCanney says they’re eventually hoping to move to a house that’s not in a flood zone.
Housing and climate experts say the pattern of HUD home sales in flood plains raises questions about whether the agency fully appreciates the growing risks posed by climate change. And it suggests the housing agency may be inadvertently exposing families to catastrophic inundation, such as a foot or more of water in their home.
“This is an incredible insight,” says Laurie Schoeman, the resilience director for the national housing nonprofit Enterprise Community Partners, which manages affordable housing around the country. “It only bolsters the reality that a lot of homes that have provided shelter to low-income households are in areas of greater risk. These homes are in really vulnerable areas, and it puts households at risk.”
HUD spokesperson Michael Burns says one reason that HUD homes are disproportionately located in flood zones is that the agency does not choose the homes it sells and is likely to end up with homes that banks can’t or won’t sell because they are less marketable. Being located in a flood zone can make a home less marketable, he says, because buyers need flood insurance.
The agency is aware of climate-driven flood risks to homes, Burns says. “Millions of people in the United States live in areas prone to flooding, a threat that is only growing as climate change worsens,” he wrote in a statement to NPR. “Ensuring that federal agencies, including HUD, have the right tools and policies in place to increase resilience nationwide is a key priority of the Biden-Harris Administration for combating climate change and building strong, equitable communities.”
HUD does not disclose flood risk in its home listings
Many buyers of HUD homes don’t learn that their houses are in an official flood zone until after they’ve made an offer. That is too late in the process for many families.
A property’s flood risk needs to be disclosed early, when potential buyers are still weighing their options and before they make a deposit, as NPR has reported.
HUD could prominently display information on flood risk and the cost of flood insurance in its home listings. The underlying information is already available from a sister agency: The Federal Emergency Management Agency (FEMA) provides the vast majority of residential flood insurance and publishes official flood maps.
But unlike real estate sites such as Realtor.com and Redfin, the official HUD Home Store website posts listings on the main page that buyers see without information about flood risk. Many HUD homes are cross-listed on multiple websites, but HUD specifically directs potential buyers to its website.
HUD did not respond to questions about why it does not include flood zone designations more prominently in the listings for the homes it sells.
Schoeman says HUD should work with real estate agents and local groups that often help market and sell HUD homes to make sure that the risk of flooding is clear from the get-go. Those groups could also help buyers understand how to mitigate flood risk — for example, by waterproofing a basement, updating yard drainage or raising the home’s foundation.
“We need to let people know, ‘Your dream house is wonderful, and here are the steps you’re going to need to take to protect it from flooding, because you’re in a flood zone,’ ” says Schoeman. “That’s the conversation we need to have. Not, ‘Here’s your house!’ And then you find out later after the first flood, ‘Oh boy, I’m in a really bad situation.’ “
Housing and climate experts say the pattern of HUD home sales in flood plains raises questions about whether the agency fully appreciates the growing risks posed by climate change. Climate change helped fuel Hurricane Ida, which caused deadly floods from the Gulf Coast to New England, including in Norco, La.
Patrick T. Fallon/AFP via Getty Images
Low-income households have the most to lose
NPR’s analysis finds that the households in neighborhoods where HUD has sold homes are poorer on average than those in areas where HUD has not sold homes.
Long-term costs of flood damage can do tremendous harm to families, especially those who put their life savings into a home and live paycheck to paycheck. Low-income households are more likely to face health problems, displacement and bankruptcy after a major flood. In the long term, flooding can wipe out a family’s generational wealth by driving down home values or destroying homes altogether.
That worries some experts, who say HUD appears to be inadvertently concentrating marginalized people in risky areas and setting families up for big financial losses down the road.
Global warming is driving more frequent and severe flooding in much of the United States. Floods that used to occur once in a lifetime are now happening every few years in some places. NPR visited multiple neighborhoods in the Tampa Bay region, along Florida’s Gulf Coast, where HUD sold more than 100 homes between 2017 and 2020. In several of those neighborhoods in coastal Pinellas and Pasco counties, streets routinely flood even on sunny days due to sea level rise.
The threat of inundation — as well as the allure of affordable homes located in flood plains — is particularly clear in places that have suffered catastrophic flooding in recent years, like the area around Baton Rouge, La.