An Analysis of Storm Surge Risk Mitigation in Residential Areas

Abstract

Hurricane Sandy ravaged the eastern seaboard of the United States on October 28-29 2012. As of January 2014, it was estimated that more than 27,000 people from New York or New Jersey had still not been able to return to their homes due to the destruction caused by Sandy. Due to this and the estimated 70 billion dollars of damage this hurricane caused, economic loss due to Hurricane Sandy has been discussed and analyzed at length at a macroeconomic level. Often lost in these region wide analyses is the microeconomic aspect of loss for small towns and communities such as Ortley Beach, New Jersey. This paper focuses on the economic loss due to Hurricane Sandy, the risk assessment conducted prior to Sandy by FEMA, and the optimal recovery strategies for 375 coastal houses in Ortley Beach which experienced some of the most brutal damage due to storm surge forces. These estimates of economic loss and optimal recovery strategies are both based on the most up to date federal regulations for coastal construction and flood related insurance payments, making this study one of the most accurate assessments of economic loss for this region to date. After examining FEMA’s flood risk assessment mapping areas for this region, this thesis concludes that FEMA risk assessment of houses relative to others in this region was extremely poor and appears to have greatly underestimated the power of storm surge due to hurricanes and other high wind events. This miss judgment was one of, if not the main contributor to the houses studied in this paper having an average economic loss of over $72,000 per house. This thesis also finds that while coastal flood insurance rates are being structured in a much more logical way, by financially incentivizing some homeowners to take preventative risk mitigation action on their own, more can be done from a policy point of view to encourage more storm surge risk mitigation actions at both a communal and individual level.