CONGRESS OF THE UNITED STATES

CONGRESSIONAL BUDGET OFFICE

A

P A P E R

JUNE 2007

Value of Properties 

in the National Flood 

Insurance Program

CBO
Pub. No. 2807
The Congress of the United States O Congressional Budget Office

CBO

Value of Properties in the 

National Flood Insurance Program

June 2007

A

PAPER
Notes

All years referred to in this paper are calendar years.

Numbers in the text and the tables may not add up to totals because of rounding.

The cover illustration is an aerial photograph of Pensacola Beach, Florida, July 11, 2005, 

the day after Hurricane Dennis struck (Remote Sensing Division, National Oceanic and 

Atmospheric Administration).
Preface

The effects of Hurricanes Katrina and Rita have prompted increased interest in policy 

questions about the National Flood Insurance Program. Some of those questions focus on the 

program’s financial soundness and on the subsidized rates charged on certain policies. This 

Congressional Budget Office (CBO) paper was written at the request of the Ranking 

Minority Member of the Senate Budget Committee to address questions about the values of 

properties covered by flood insurance at subsidized rates. In keeping with CBO’s mandate to 

provide objective analysis, the paper makes no recommendations.

Perry Beider wrote the paper, under the guidance of Joseph Kile and David Moore. The 

author thanks Thomas Hayes and Dan Spafford of the Federal Emergency Management 

Agency and Parker Boone of Computer Sciences Corporation for providing data on flood 

insurance policies. He also thanks James Q. Adams, Reggie Toledo, and their colleagues at 

Marshall & Swift/Boeckh for their work in matching the policy addresses to data on property 

values. Robert Dennis, Douglas Hamilton, Arlene Holen, Daniel Hoople, Donald Marron, 

David Torregrosa, and G. Thomas Woodward of CBO provided helpful comments.

Kate Kelly edited the manuscript, with assistance from John Skeen, and Leah Mazade proofread it. Maureen Costantino designed the cover and prepared the report for publication, with 

assistance from Allan Keaton. Lenny Skutnik produced the printed copies, Linda Schimmel 

coordinated the print distribution, and Simone Thomas prepared the electronic version for 

CBO’s Web site (www.cbo.gov).

Peter R. Orszag

Director

June 2007

Contents

Summary and Introduction 1

NFIP Policies and Pricing 2

Findings 4

Insured Properties Versus Properties Nationwide 4

Properties with Insurance: Coastal Versus Inland 6

Subsidized Versus Unsubsidized Properties 7

Distributions of Property Values 8

Nonprincipal Residences: Vacation and Rental Properties 9

Tables

1. Median and Average Property Values of Sampled NFIP

Properties 6

2. Average Land and Improvement Values of NFIP Properties 7

3. Average Value of NFIP Nonprincipal and Principal 

Single-Family Residences 11

Figures

1. Value Distributions of Sampled NFIP Properties 9

2. NFIP Properties with Values Exceeding Specified Amounts 10

3. Subsidized Single-Family Residences with Values Exceeding 

Specified Amounts 12

Box

1. Data for This Report 4

Value of Properties in the 

National Flood Insurance Program

Summary and Introduction 

The National Flood Insurance Program (NFIP), administered by the Federal Emergency Management Agency 

(FEMA), is the primary source of insurance against flood 

damage in the United States. Property owners may purchase coverage in amounts up to $350,000 for singlefamily residential properties ($250,000 for the structure 

and $100,000 for its contents) and up to $1 million for 

nonresidential properties ($500,000 each for structure 

and contents).1 As of February 2007, the 5.4 million policies in force had a total coverage of $1.0 trillion.2

The devastation caused by Hurricanes Katrina and Rita 

in 2005, which harmed both low- and high-income communities, drew attention to an important aspect of the 

NFIP: By design, the program is not actuarially sound—

that is, its premiums and fees are insufficient to cover the 

average claims and expenses expected over the long run. 

An actuarially sound program would collect premium 

payments that would be expected to allow it to cover 

costs even in a catastrophic year, through some combination of reserves and borrowing to be repaid afterward. 

Although the NFIP operated as a largely self-financed 

program for many years, occasionally borrowing relatively 

small amounts from the Treasury and repaying them, it 

does not generate regular surpluses of the size needed to 

cover catastrophic losses. 

The program’s current debt—$17.5 billion as of May 

2007, with an authorized debt limit of $20.8 billion—

could be reduced if there were several years with belowaverage flood losses. But over the long run, the NFIP 

debt can be expected to grow by about $900 million per 

year, given current subsidy rates and the current mix of 

flood insurance policies.3

The program’s actuarial imbalance arises, at least in part, 

from a statutory requirement that some NFIP policyholders—primarily those whose properties were built 

before their communities joined the program—receive 

coverage at rates that are explicitly subsidized.4 Lawmakers built those subsidies into the program partly to 

ease the financial burden on property owners—some of 

whom had not previously realized the extent of their 

flood risk and whose actuarial (full-risk) premiums could 

be unattractively high—and partly as an incentive to 

communities to participate in the program and thus 

1. Some flood insurance policies are contents-only policies purchased by renters. Where the distinction is not important, this 

report uses “property owners” to refer to both types of policyholder.

2. Those figures were collected from http://bsa.nfipstat.com/reports/

1011_200702.htm, a table of NFIP policy statistics maintained 

by a FEMA contractor.

3. The Congressional Budget Office and others have used FEMA’s 

estimates of the average percentage discount on subsidized policies 

to calculate the program’s annual actuarial imbalance of $1.3 billion (see, for example, statement of Donald B. Marron, Acting 

Director, CBO, before the Senate Committee on Banking, Housing, and Urban Affairs, The Budgetary Treatment of Subsidies in the 

National Flood Insurance Program, January 25, 2006). Of that 

$1.3 billion, about $900 million is in forgone receipts that otherwise would be available to pay claims. The balance represents forgone allowances for sales expenses that otherwise would go to 

reimbursing the private insurance companies that sell the policies 

on behalf of the NFIP. 

4. Coverage is available only for properties in communities that have 

either joined or applied to join the NFIP. More than 20,000 communities, whose residents account for 98 percent of the U.S. population, have joined the program (personal communication, Dan 

Spafford, FEMA, June 19, 2007). To be accepted, a community 

must adopt building codes and floodplain management practices 

that meet or exceed FEMA’s standards. 
2 VALUE OF PROPERTIES IN THE NATIONAL FLOOD INSURANCE PROGRAM

to mitigate losses by adopting the NFIP’s requirements 

for building standards and floodplain management.

The 2005 hurricane season brought increased attention 

to the program’s subsidies. Policymakers have expressed 

concerns about the size of the program’s actuarial imbalance, and they have questioned whether it is still appropriate for taxpayers to subsidize flood coverage, particularly for high-income policyholders who own property in 

high-risk areas (for example, along coastlines). Legislative 

proposals have been made to eliminate the subsidy for 

coverage on some types of properties, such as second 

homes and vacation properties. 

This report by the Congressional Budget Office (CBO) 

addresses factual questions about the values of properties 

insured at subsidized rates (hereafter called subsidized 

properties) under the NFIP. Specifically, it compares the 

values of the properties covered by subsidized and unsubsidized insurance policies, and it examines in particular 

the subset of properties that are not primary residences— 

vacation properties, second homes, or rental properties. 

The analysis uses data on the values of more than 10,000 

NFIP-insured properties, sorted into four groups as subsidized or unsubsidized properties in coastal or inland 

areas. For this report, CBO considers a property to be in 

a “coastal” area if it is within a five-digit zip code that has 

any properties that are subject to storm wave action—

that is, any properties in a “Zone V” area identified on a 

FEMA flood insurance rate map (FIRM). For this analysis, zip codes with no Zone V areas are considered 

“inland.”

Because the 10,000 properties CBO analyzed are not a 

statistical random sample, the numerical results cannot 

be extrapolated nationwide. Nonetheless, several qualitative conclusions are drawn from the analysis:

B The properties covered under the NFIP tend to be 

more valuable than other properties nationwide. 

The median value of owner-occupied housing in the 

United States is about $160,000; across the four 

classes of property in the sample, median values for 

single-family principal residences range from about 

$220,000 to $400,000. Much of the difference is 

attributable to the higher property values in areas that 

are close to water.

B Many subsidized properties, especially those in coastal 

areas, have high values. For example, 40 percent of 

subsidized coastal properties in the sample are worth 

more than $500,000; 12 percent are worth more than 

$1 million. For inland properties, the analogous figures are 12 percent and 3 percent.

B The difference in the value of subsidized and unsubsidized properties in coastal areas is attributable more to 

the value of the land than to the value of the structures 

that occupy it. Subsidized structures are less valuable, 

on average, than unsubsidized structures in coastal 

areas. Those patterns of land and structure value occur 

because subsidies go to older structures, which, 

although perhaps less valuable in themselves, often 

occupy more desirable, first-developed locations. By 

contrast, inland subsidized properties tend to be less 

valuable than inland unsubsidized properties.

B A significant fraction of subsidized coastal properties 

(23 percent in the sample) consists of residential properties that are not the policyholders’ principal residences. That category includes second homes and 

vacation properties, but it also includes properties that 

are rented to year-round tenants. Property values for 

subsidized coastal nonprincipal residences generally 

are higher than are those for subsidized coastal principal residences.

The scope of this study did not include analyzing the distribution of financial benefits that result from the subsidy. Some or all of the value of the subsidy available on 

coverage for a given property is likely to be capitalized 

into the property’s value. Thus, when a subsidized property is sold, the buyer essentially pays for some or all of 

the subsidy’s value up front, through a higher purchase 

price, thus reducing or eliminating the net gain. Exploring the distribution of the benefits of NFIP subsidies 

would involve analyzing both the extent to which the 

subsidies are capitalized and the turnover of the subsidized properties. 

NFIP Policies and Pricing

The flood insurance program offers separate policies to 

insure building structures and contents. Coverage can be 

purchased to cover up to $250,000 for a residential building, up to $100,000 for residential contents, and up to 

$500,000 each for a nonresidential structure and its contents. Eighty-five percent of the nation’s flood insurance 
VALUE OF PROPERTIES IN THE NATIONAL FLOOD INSURANCE PROGRAM 3

contracts are written for single-family homes, nearly 

10 percent cover multifamily residences, and about 6 percent are for nonresidential properties (see Box 1).

Most flood insurance policyholders pay premiums that 

FEMA considers actuarially sound on the basis of the 

agency’s FIRMs and its estimates of the frequency of 

storms of different sizes.5 Roughly one-quarter of the 

NFIP policies, however, are sold at rates that are explicitly 

subsidized. Most of the subsidized policies cover structures (or the contents of structures) that were built before 

1975 or before the creation of a community’s FIRM, 

whichever is later.6

 Consequently, properties covered at 

subsidized rates generally are older than those whose 

owners pay the NFIP’s full-risk premiums. Pre-FIRM 

properties remain eligible for subsidized coverage when 

they are sold; they become ineligible only when they sustain “substantial damage” in a flood (with a loss of 

50 percent of the structure’s market value) or when they 

undergo “substantial improvement” (with an increase of 

50 percent in the structure’s market value).

The subsidies apply only to a first tier of coverage: 

$35,000 for a residential building of one to four dwellings, $100,000 for nonresidential and larger residential 

buildings, $10,000 for the contents of a residential 

building, and $100,000 for the contents of a nonresidential building. Most policyholders purchase coverage 

exceeding those amounts. According to FEMA, in 2004 

the average limit on all flood insurance policies (including unsubsidized policies and those covering contents 

only) was $155,816. Policyholders who purchase coverage above the subsidized tier save money overall but do 

not face incentives at the margin to purchase excessive 

coverage or to neglect opportunities to reduce their 

exposure to flood risk.

In percentage terms, overall discounts on the subsidized 

policies tend to be large, taking into account coverage 

purchased above the first tiers. Because most claims for 

flood damage are relatively small—the average claim on a 

subsidized policy in 2004 was about $31,000, and the 

median claim was below that—the rates for the first tier 

of coverage have a much greater effect on the actuarial 

soundness of the overall premium than do the rates above 

the first tier.7 FEMA estimates that, on the whole, property owners with subsidized policies pay 35 percent to 

40 percent of their full-risk premiums. The average subsidized annual premium that FEMA estimated for 

May 2006 at $721 would therefore cost $1,800 to 

$2,060 as a full-risk premium. For properties in areas 

where the probability of flooding is particularly high, 

full-risk premiums could cost more than three times the 

average.8

5. Whether those “actuarial” rates are truly sufficient to cover average 

long-run costs depends on the accuracy of FEMA’s maps and of its 

forecasts of the frequency and severity of storms. CBO is exploring whether there is evidence of inaccuracies (maps that do not 

show recent land development projects or that insufficiently consider possible increases in storm frequency) that would suggest a 

downward bias in FEMA’s actuarial rates. 

6. Also eligible are properties in communities for which FIRMs are 

not yet completed and properties built between 1975 and 1981 in 

areas that are subject to coastal flooding. (In 1981, FEMA incorporated new information about wave height and revised its newconstruction standards for such areas.) Properties that will have 

flood protection when a half-finished structural project (such as a 

levee) is completed are eligible, as are properties in areas that were 

protected by structures that FEMA now deems insufficient provided that the schedule and plan for making repairs or upgrades 

meet specific standards. Together, those four types of properties 

account for about 8 percent of subsidized policies in the program. 

In addition, properties whose rates would otherwise be subject to 

increase when a FIRM is revised are “grandfathered in” to the previous rate category.

7. The NFIP’s periodic Actuarial Rate Reviews (www.fema.gov/

business/nfip/actuarial_rate.shtm) include cumulative numbers 

and sizes of claims paid; CBO calculated the average 2004 loss 

payment by comparing the figures through 2003 with those 

through 2004 in consecutive editions. The reports do not provide 

data on the median loss payment; however, the median is below 

the average because the average is more strongly influenced by 

the (comparatively few) payments for severe damage. Newer 

unsubsidized properties experience fewer events of minor flooding 

because they are subject to tighter building codes and land management policies; thus, the average 2004 loss payment on those 

properties was larger—about $40,300.

8. PriceWaterhouse Coopers, Study of the Economic Effects of 

Charging Actuarially Based Premium Rates for Pre-FIRM Structures

(prepared for the Federal Emergency Management Agency, 

May 1999), p. 5-5, available from www.fema.gov/library/ 

viewRecord.do?id=2555.
4 VALUE OF PROPERTIES IN THE NATIONAL FLOOD INSURANCE PROGRAM

Findings

Examination of the data for the 10,000 NFIP properties 

shows that a significant fraction of subsidized policies are 

written for high-value properties. That fact is attributable 

more to the prevalence of such properties in the program 

than to a disproportionate allocation of subsidies to highvalue properties. Even so, for some categories, subsidized 

properties are worth more than unsubsidized properties. 

The tendency toward above-average values in the NFIP is 

particularly evident for some subgroups of properties, 

notably nonprincipal residences and nonresidential 

properties.

Insured Properties Versus Properties Nationwide 

The average property value in the NFIP sample—for all 

types of property, including multifamily dwellings and 

commercial properties—ranged from $325,000 for subsidized inland properties to $570,000 for subsidized coastal 

properties; unsubsidized properties fell in between 

Box 1.

Data for This Report

The Congressional Budget Office (CBO) used a twostep process to obtain data on the 10,159 properties 

that are the primary subject of its analysis.

First, the Federal Emergency Management Agency 

(FEMA) drew random samples of 5,000 insurance 

contracts in each of four property categories: subsidized and unsubsidized coastal and inland properties. 

(In general, each contract represents one policy; however, more than one policy may be associated with a 

single contract for a condominium. For this analysis, 

FEMA drew random samples of addresses from its 

full set of contracts.) For this study, “coastal” areas 

extend beyond the Zone V areas shown on the 

FEMA flood insurance rate maps; each coastal area 

includes all properties in any zip code that contains 

even one insured Zone V property. CBO requested 

that classification of the data because the zones themselves, which represent only about 2 percent of the 

properties in the National Flood Insurance Program, 

seemed too small to reflect the interest in “coastal 

properties.”1 About 40 percent of flood insurance 

policies are written for properties in coastal areas.2

For each of the 20,000 properties initially included in 

the sample, FEMA provided the policy number, 

address, and occupancy type (single-family residence, 

two-to-four-family residence, larger residential, or 

nonresidential). FEMA also identified each residential property as the policyholder’s principal or nonprincipal residence.

In the second step, CBO submitted the 20,000 

addresses to Marshall & Swift/Boeckh (MSB), a company that supplies information on property values. 

MSB gathers data on assessed values from local tax 

assessors’ offices, and it uses a proprietary model to 

arrive at its own property value estimates. MSB’s 

database covers roughly 85 percent of the nation’s 

metropolitan statistical areas (MSAs), which contain 

about 90 percent of the nation’s population. The 

database does not include rural, non-MSA areas.3

1. Coastal areas could be defined more narrowly by using census tracts instead of zip codes, but FEMA does not collect 

census tract data on the properties covered by flood insurance. The definition used here excludes coastal areas that 

have no Zone V areas—that is, no properties subject to storm 

wave action—but such areas are unlikely to be important in 

the flood insurance program.

2. That includes 10 percent that are subsidized and 29 percent 

that are not. Similarly, the roughly 60 percent of inland properties nationwide consist of 15 percent that are subsidized 

and 45 percent that are not. In both types of areas, therefore, 

about one-quarter of the policies are subsidized. 

3. Personal communication, James Q. Adams, Marshall & 

Swift/Boeckh, May 21, 2007.
VALUE OF PROPERTIES IN THE NATIONAL FLOOD INSURANCE PROGRAM 5

Box 1.

Continued

Distribution of Contracts, by Structure Type

(Percent)

Source: Congressional Budget Office.

Note: Because several policies can be associated with a 

contract for a condominium, multifamily residential 

properties represent 9.4 percent of contracts but 

26.5 percent of policies.

a. As of December 31, 2005. 

Matches for 11,847 of the 20,000 addresses (59 percent) were found in MSB’s database; some properties 

that could not be matched are outside the database’s 

coverage area, but most of the unmatched addresses 

probably represent coding problems. (According to 

MSB staff, coding problems alone—missing subaddresses, revised zip codes, bad street names, informal neighborhood names instead of official jurisdiction names, and others—can lead to matching-failure 

rates of 50 percent.)

Property values were available from one source or 

another for almost all of the matched properties. Estimated values were available for 10,159 properties; a 

larger number (11,507) of assessed values was available, but the estimated values reflect wider information and appear to be less subject to coding errors and 

other problems of data quality. (For example, 961 of 

the 11,507 nonzero assessed values were below 

$10,000; none of the estimated values was below 

$26,000.) Accordingly, the analyses below reflect the 

estimated values, with the exception of the analysis of 

the disaggregated values for land and improvements, 

for which estimated values were not available.

The 10,159 properties for which CBO has estimated 

values consist of 2,506 subsidized and 2,453 unsubsidized coastal properties and 2,092 subsidized and 

3,108 unsubsidized inland policies. Relative to the set 

of all properties with NFIP coverage, the sample 

overweights subsidized properties (46 percent in the 

sample versus 26 percent nationwide) and coastal 

properties (48 percent versus 40 percent). Although 

the original samples of 5,000 addresses were drawn 

randomly, the properties analyzed here are not random statistical samples from each of the four groups. 

For example, the data do not cover insured properties 

in communities outside the metropolitan areas in 

MSB’s database (those communities represent about 

10 percent of the U.S. population). 

In addition, address match rates and the availability 

of estimated values were lower for multifamily and 

nonresidential properties than for single-family residences—for example, because MSB’s data do not 

include separate addresses for individual apartments 

(some of which may have contents insurance). As 

shown in the table, the result overrepresents singlefamily homes somewhat and underrepresents the 

other two categories. CBO believes, however, that 

most of the unmatched properties do not differ in 

relevant ways from the matched properties and that 

the limitations on the sample do not affect the results 

of the analysis in a qualitative way.

Single-Family Residential 85.0 93.2

Principal residence 70.7 77.6

Nonprincipal residence 13.9 15.5

Unknown 0.3 0

Multifamily Residential 9.4 5.4

Principal residence 3.8 2.7

Nonprincipal residence 5.6 2.7

Nonresidential 5.6 1.4

Nationwidea This Study

Sampled in
6 VALUE OF PROPERTIES IN THE NATIONAL FLOOD INSURANCE PROGRAM

Table 1.

Median and Average Property Values of Sampled NFIP Properties

Source: Congressional Budget Office.

Note: NFIP = National Flood Insurance Program.

(see Table 1).9 In all cases, the number of properties with 

very high values helps raise the averages; the median values are distinctly lower. As with the averages, the lowest 

and highest median values are for the subsidized inland 

and coastal properties, respectively.

Although a direct comparison with the universe of all 

properties nationwide is not possible, the best available 

data indicate that properties that carry flood insurance 

tend to be more valuable as a group. According to the 

Census Bureau’s American Community Survey, the 

median value of owner-occupied housing in the United 

States in 2004 was $151,366; its American Housing Survey reported a 2005 median value of $165,344.10 NFIP 

data do not show whether residential properties are occupied by their owners; the best available comparisons with 

the Census Bureau’s figures are the median values (estimated as of 2006) for single-family principal residences, 

which range from $224,000 for subsidized inland 

properties (roughly 40 percent above the national figure) 

to $403,000 for subsidized coastal properties.

Properties with Insurance: Coastal Versus Inland 

Coastal properties have much higher average and median 

values than inland properties do, primarily because 

coastal land is more expensive. For subsidized properties, 

the average and median values are 75 percent and 86 percent higher, respectively; for unsubsidized properties, the 

values are 40 percent and 21 percent higher (see Table 1). 

Subsidized properties are more valuable than unsubsidized properties in coastal areas but less valuable inland.

The contribution of land value to the disparity between 

coastal and inland property values is shown in Table 2, 

which presents data from a smaller sample of properties 

for which assessed land and improvement values are available separately. (The assessed values are not directly comparable with those used elsewhere in this report, which 

come from a valuation model developed by Marshall & 

Swift/Boeckh [MSB].)11 The difference 

Subsidized Coastal 2,506 $570,238 $429,118 1,677 $402,768

Unsubsidized Coastal 2,453 $515,262 $368,422 1,843 $339,842

Subsidized Inland 2,092 $325,017 $231,316 1,685 $223,692

Unsubsidized Inland 3,108 $368,023 $304,252 2,690 $306,107

Memorandum:

2005 American Housing Survey $165,344

2004 American Community Survey $151,366

Median Value

Single-Family Principal Residences

Median

Property

Value Number

Bureau of the Census Estimates for Median Value of All U.S. Owner-Occupied Housing

Number of

Properties in

Sample Data

Average

Property

Value 

9. Commercial properties tend to be more valuable than residential 

properties, but because they represent only about 2 percent of the 

sample, excluding them would not significantly change the average or median values in Table 1. 

10. The former figure is at www.census.gov/compendia/statab/tables/

07s0960.xls; the latter at www.census.gov/hhes/www/housing/

ahs/ahs05/tab314.html. For a discussion of the differences 

between the two surveys, see Bureau of the Census, “Fact Sheet: 

Differences Between the Housing Cost and Housing Quality Estimates from the American Community Survey and the American 

Housing Survey” (November 2004), www.census.gov/hhes/www/

housing/hsgcostfactsheet.html.

11. For the same properties, assessed values tend to be significantly 

lower—by about 50 percent, on average, for each of the four types 

of property. The differences arise from assessments that are outdated (sometimes by years or even decades, if localities reassess 

only when ownership changes); assessment growth rate caps; and 

exemptions for some classes of property owners, such as veterans 

or other groups. CBO considers the values produced by MSB’s 

model to be better indicators of current market values (see Box 1 

on page 4); however, the model does not provide separate values 

for land and improvements.
VALUE OF PROPERTIES IN THE NATIONAL FLOOD INSURANCE PROGRAM 7

Table 2.

Average Land and Improvement Values of NFIP Properties

Source: Congressional Budget Office.

Notes: The component and total property values reported in this table are based on tax assessment data, which generally provide lower 

figures than those from the Marshall & Swift/Boeckh proprietary model, used elsewhere in this report.

NFIP = National Flood Insurance Program.

in average land values is more than 80 percent of the difference in average total values for subsidized coastal and 

subsidized inland properties. Land values account for 

more than 100 percent of the difference for corresponding unsubsidized properties, more than compensating for 

the fact that average improvement value is lower along 

the coasts than inland. However, that relationship 

between average improvement values of unsubsidized 

properties in the two areas could be an artifact of the limited samples of properties for which separate land and 

improvement data are available. In particular, the unsubsidized inland properties appear to be relatively more 

valuable in this set of properties than in the larger sets of 

all properties with assessed or estimated values.12

Subsidized Versus Unsubsidized Properties 

Table 2 also shows that average improvement values for 

coastal and inland subsidized properties are below those 

of corresponding unsubsidized properties. Because the 

subsidies go primarily to properties that were built before 

a community FIRM was drawn, the subsidized and 

unsubsidized categories can be roughly associated with 

older and newer properties, respectively. Thus, the relative values in Table 2 can be interpreted as showing that 

older structures tend to be less valuable—perhaps because 

they are smaller or lack modern amenities, or perhaps 

simply because they have aged. The difference between 

subsidized and unsubsidized inland properties could be at 

least partly an artifact of the samples for which separate 

data on land and structure values are available. At a minimum, though, the evidence here does not suggest that the 

subsidies tend to cover larger or more luxurious structures, whether inland or in a coastal area.

Land values reveal different inland and coastal patterns: 

Newer, unsubsidized properties have higher land values in 

inland areas, whereas older subsidized properties occupy 

more valuable land in coastal areas. One likely reason for 

the pattern observed in coastal areas is that the more 

desirable locations often are developed first. Another factor is that the subsidies themselves help raise property

Subsidized Coastal 1,173 $130,383 $270,308 $400,691

Subsidized Inland 1,727 $93,105 $75,406 $168,511 ________ ________ ________

Difference in value $37,278 $194,902 $232,180

Unsubsidized Coastal 753 $147,714 $194,133 $341,847

Unsubsidized Inland 1,008 $177,611 $143,005 $320,616 ________ ________ ________

Difference in value -$29,897 $51,128 $21,231

Number of 

Properties with

Data Available

Average

Improvement Value

Average Average

Land Value Total Value

12. Property value data disaggregated into assessments of land and 

improvement values are available only for 40 percent of the properties with nonzero assessed values. The average assessed value for 

unsubsidized inland properties with disaggregated data is onethird higher than for properties without such data. In contrast, 

averages for the other three categories for properties with disaggregated data are 2 percent to 27 percent lower than for those without. (The reason for this variation in relative values is not known.) 

If the pattern of average total values in the last column of Table 2 

(where the inland-to-coastal ratio of average values of unsubsidized properties is .94) were more like the pattern for the larger 

sets of all sampled properties with estimated values, as shown in 

Table 1 (where that ratio is .71), the finding that average improvement value is higher for unsubsidized inland properties than for 

unsubsidized coastal properties might be reversed.
8 VALUE OF PROPERTIES IN THE NATIONAL FLOOD INSURANCE PROGRAM

values.13 For example, if the amount of the subsidy 

increased at an annual rate of 3 percent, then a 40-year 

subsidy currently equal to $500 that is fully capitalized at 

10 percent would increase a property’s value by about 

$7,300. An indefinite subsidy of $2,000 today capitalized 

at 7 percent would add $53,500. (Those figures do not 

correspond to the present-value cost to the Treasury. That 

cost would reflect a lower discount rate and account for 

the fact that part of the subsidy cost is borne through 

lower reimbursements for sales expenses to the private 

insurance companies that typically sell the policies.) The 

subsidies help raise property values in inland areas as well; 

there, however, recent construction evidently is occurring 

in more desirable locations (for example, outer suburbs 

versus central cities) and that difference outweighs the 

effect of the subsidies.

The same patterns are seen for overall property values: 

Both Table 2 and Table 1 show that subsidized properties 

tend to be more valuable than unsubsidized properties in 

coastal areas and that the opposite is true in inland. The 

figures in Table 1, which reflect larger sets of properties 

and the estimated property values from the MSB model, 

show that the average and median values of subsidized 

properties are 11 percent and 16 percent higher, respectively, than are those of unsubsidized properties in coastal 

areas but 12 percent and 24 percent lower in inland 

areas.14

Distributions of Property Values 

The full distributions of property values are represented 

in Figure 1, which shows the fraction that falls within 

each of a dozen intervals. (To conserve space in Figure 1, 

the last two intervals are 10 and 30 times larger than the 

others. To avoid making the distributions appear to be 

artificially dense in those intervals, the values depicted 

there are the average densities over the 10 or 30 “subintervals” they contain.)

The distributions of coastal and inland property values 

are similarly shaped, with the greatest concentrations 

either in the $100,000–$200,000 range or in the 

$200,000–$300,000 range. The main differences among 

the four distributions can be described qualitatively in 

terms of the location and height of the peak and by the 

sharpness or gradualness with which the distributions 

decline from the peak. The differences are consistent with 

the differences in medians and averages. For example, the 

fact that subsidized coastal properties tend to be more 

valuable than unsubsidized coastal properties is reflected 

in the lower peak and slower decline of the subsidized 

coastal distribution. Similarly, the high early peak and 

sharp decline of the distribution of the values of subsidized inland properties reflect their lower values, on average, than unsubsidized inland properties.

Another way to present the four distributions is in terms 

of the fractions that are worth more than certain threshold values (see Figure 2). Forty percent of subsidized 

coastal properties are valued above $500,000, for example, as are 20 percent of subsidized inland properties. The 

figure also shows that the distributions of subsidized and 

unsubsidized properties are broadly similar, although subsidized coastal properties tend to be somewhat more 

13. In property assessment data, land value is everything that remains 

after subtracting the replacement cost of the improvements from 

the total property value. Thus, although flood insurance covers 

damage to structures or their contents, the impact of the subsidies 

on property values is captured in the land values.

14. The differences in the average values of subsidized and unsubsidized properties are highly significant in statistical terms, as are 

the differences in the medians. The probabilities that the observed 

differences in the averages reflect only random fluctuations 

around the same “true” average, rather than real differences in the 

underlying distributions, are .0003 for coastal properties and 

.0001 for inland properties. It is difficult to calculate analogous 

figures for the probabilities that the medians are equal. However, 

the 99.9 percent confidence intervals for the true medians do not 

overlap: In coastal areas, the probability is less than .001 that the 

true median is higher than $390,600 for unsubsidized properties 

or less than $404,500 for subsidized properties; inland, the probability is equally small that the true median exceeds $255,000 for 

subsidized properties or falls below $287,300 for unsubsidized 

properties.
VALUE OF PROPERTIES IN THE NATIONAL FLOOD INSURANCE PROGRAM 9

Figure 1.

Value Distributions of Sampled NFIP Properties

(Percentage of properties) 

Source: Congressional Budget Office.

Notes: The first ten intervals span $100,000 each; the last two span $1 million and $3 million, respectively. To conserve space, the last two 

intervals are 10 and 30 times larger than the others. To avoid making the distributions appear artificially dense in those intervals, the 

values depicted there are the average densities over the 10 or 30 “subintervals” they contain.

NFIP = National Flood Insurance Program.

valuable than unsubsidized coastal properties, and the 

reverse is true for inland properties.

Nonprincipal Residences: Vacation and

Rental Properties 

FEMA’s data classify residential property as a policyholder’s principal or nonprincipal residence.15 In the 

sample, 23 percent of the subsidized coastal properties 

and 13 percent of the subsidized inland properties are 

single-family homes that are not the policyholders’ principal residences. Those residences include second homes 

Up to

100

100 to

200

200 to

300

300 to

400

400 to

500

500 to

600

600 to 

700

700 to

800

800 to

900

900 to

1,000

1,000 to

2,000

2,000 to

5,000

0

5

10

15

20

25

Unsubsidized

Subsidized

Coastal Properties

0

Up to

100

100 to

200

200 to

300

300 to

400

400 to

500

500 to

600

600 to 

700

700 to

800

800 to

900

900 to

1,000

1,000 to

2,000

2,000 to

5,000

0

5

10

15

20

25

Thousands of Dollars

Inland Properties

Unsubsidized

Subsidized



• Subsidized

Unsubsidized



• Subsidized

Unsubsidized

15. FEMA defines a principal residence as one occupied by the policyholder or policyholder’s spouse during at least 80 percent of the 

previous year (or of the period of ownership, if less than one year). 

Its records can list the same residence as both nonprincipal (in 

data on a policy purchased by the landlord to insure the structure) 

and principal (in data on a contents policy purchased by the 

tenant).
10 VALUE OF PROPERTIES IN THE NATIONAL FLOOD INSURANCE PROGRAM

Figure 2.

NFIP Properties with Values Exceeding Specified Amounts

(Percentage of properties) 

Source: Congressional Budget Office.

Note: NFIP = National Flood Insurance Program.

and vacation homes, which have attracted particular 

attention from policymakers, and rental properties that 

are the principal residences of their tenants. (The analysis 

here of nonprincipal residences focuses on single-family 

properties—more than 90 percent of all properties in the 

data samples—because they are less likely than multifamily residences to be used as rental properties with fulltime tenants.)

Coastal homes that are not the policyholders’ principal 

residences generally are more valuable than are coastal 

homes that are principal residences. Subsidized coastal 

single-family homes that are nonprincipal residences are 

worth $634,000, on average, which is 20 percent above 

the average value of $530,000 for principal residences 

(see Table 3). The difference in average value between 

nonprincipal and principal residences is even larger for 

the corresponding groups of unsubsidized properties. The 

pattern of subsidized coastal properties being generally 

more valuable than unsubsidized coastal properties does 

not hold for the nonprincipal single-family homes; if anything, they may be somewhat less valuable, although the 

difference in averages ($634,000 versus $677,000) is not 

statistically significant. 

0 100 200 300 400 500 600 700 800 900 1,000 2,000 5,000

0

20

40

60

80

100

Unsubsidized

Subsidized

Coastal Properties

0 100 200 300 400 500 600 700 800 900 1,000 2,000 5,000

0

20

40

60

80

100

Thousands of Dollars

Inland Properties

Subsidized

Unsubsidized



• Subsidized

Unsubsidized



• Subsidized

Unsubsidized
VALUE OF PROPERTIES IN THE NATIONAL FLOOD INSURANCE PROGRAM 11

Table 3.

Average Value of NFIP Nonprincipal and Principal Single-Family Residences

Source: Congressional Budget Office.

Notes: Percentages of subsidies do not add to 100 because multifamily and nonresidential properties are not included.

NFIP = National Flood Insurance Program; n.a. = not applicable.

There is only a slight difference, not statistically significant, in the value of principal ($320,000) and nonprincipal ($307,000) subsidized inland single-family 

homes. However, the difference in the average value of 

inland subsidized and unsubsidized single-family properties that are not principal residences ($320,000 and 

$394,000) is statistically different, and it suggests that 

older properties are less valuable. 

Consistent with the average values in Table 3, the fractions of properties that exceed given threshold values are 

somewhat higher for coastal subsidized single-family 

homes that are not policyholders’ principal residences (see 

Figure 3, top). For example, 47 percent are worth more 

than $500,000 and 15 percent are valued at more than 

$1 million. In contrast, 37 percent of coastal subsidized 

principal residences are valued above $500,000 and 

10 percent are worth more than $1 million. The distributions of value in inland areas for subsidized single-family 

principal residences and nonprincipal residences are 

nearly identical (see Figure 3, bottom).

Nonresidential properties also tend to have high values. 

Average values of the properties in the sample exceed 

those for residential properties by 80 percent or more for 

each of the four combinations of region and subsidy status. In particular, the average value of subsidized nonresidential properties is $1 million in coastal areas and 

$730,000 inland. However, nonresidential properties represent only a small share of those covered by flood insurance—less than 6 percent nationwide, according to 

FEMA.

Subsidized Coastal 568 22.7 $634,016 1,675 66.8 $529,919

Unsubsidized Coastal 434 n.a. $677,131 1,843 n.a. $468,338

Subsidized Inland 269 12.9 $320,185 1,679 80.3 $306,995

Unsubsidized Inland 301 n.a. $393,966 2,690 n.a. $361,654

Percentage of Percentage of 

Nonprincipal Residences Principal Residences

Average

Properties Region Value

Average

Value

Number of Number of Subsidies in 

Properties

Subsidies in

Region
12 VALUE OF PROPERTIES IN THE NATIONAL FLOOD INSURANCE PROGRAM

Figure 3.

Subsidized Single-Family Residences with Values Exceeding Specified Amounts

(Percentage of properties) 

Source: Congressional Budget Office.

0 100 200 300 400 500 600 700 800 900 1,000 2,000 5,000

0

20

40

60

80

100

Coastal Residences

0 100 200 300 400 500 600 700 800 900 1,000 2,000 5,000

0

20

40

60

80

100

Thousands of Dollars

Inland Residences

Nonprincipal

Principal

Nonprincipal

Principal

• •



• Principal

Nonprincipal



• Principal

Nonprincipal