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What You Need To Know About the Possible Buyouts For Flooded Louisville Homes

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The Louisville Metro Council, Mayor Greg Fischer and MSD officials announced a plan this week for possibly creating a home buyout program for houses in the area that have been consistently flooded-out during the past several years.

Right now, there are a slew of homeowners in flood-prone areas with flood damage they can’t repair even though they have flood insurance.

At issue is an almost decade-old local ordinance borne out of a federal initiative. In 2006, the Metro Council made MSD the flood plain manager of the area. This means the quasi-governmental agency is in charge of enforcing the so-called “50 percent rule:” a FEMA rule prohibiting repairs on homes that over the course of a decade have filed claims for damages surpassing more than 50 percent of a home’s assessed value.

Well, some homebuyers in Louisville recently found out the houses they bought were close to that line.

That’s because MSD does not publicly disclose whether or not a house is reaching that 50 percent limit, even though they keep track of that information.

Brian Bingham, MSD’s chief of operations, said the agency hasn’t given out that information in the past partly because regulators aren’t sure what information they can or cannot give out.

“There is a lot of work being done right now to be able to verify what can or cannot be disclosed right now,” he said. “For example, anything that goes through the national flood insurance program claims that information is protected under certain federal laws from being disclosed.”

“So, we can’t -- even though we might have that information --we can’t legally give that information out,” Bingham said.

Following a recent storm in mid-March, some homeowners are now prohibited from making repairs and are left with one of three choices: demolish the house, move the house to a more elevated piece of land or physically raise the house.

For some, none of the options are feasible.

That’s why a group of homeowners from the Riviera neighborhood off of River Road talked to MSD and Metro Council members this week in an effort to convince officials to buy them out so no one else is saddled with this problem and they don’t lose their investment.

This problem, in a lot of ways, has been a long time coming.

As Metro Councilwoman Angela Leet, an engineer, put it: “it’s a prime example of an unintended consequence of rulemaking.”

Why do we have a 50 percent rule?

One of the more initially baffling aspects of this story has to do with why MSD, city officials or taxpayers would care how much one single homeowner is paying—with help from their flood insurance—to repair damage created by a flood.

The answer to this question goes back two decades when lawmakers started to notice increased flooding due to climate change. Every couple of years, the same houses were flooded-out and needed costly repairs.
Because most flood insurance across the country was—and is still— subsidized by taxpayer money, federal officials wanted to make sure taxpayers weren’t paying for the same repairs over and over again without an end in sight. So any home that was costing more than half its value was deemed a bad investment for taxpayer money. That’s why a rule was made to require these homes to be moved, elevated or torn down.

Since FEMA was or is unable to enforce this nationwide, local governments are tasked with coming up with a way to enforce it within their respective municipalities.

What can be done?

This is a really difficult question that city officials are going to be forced to grapple with in a relatively short amount of time. Right now, there are homeowners stuck paying a mortgage for a house they can neither live in nor repair. So, the clock is set and officials need to come up with a short-term solution for these homeowners as well as a long-term plan for what to do with other homes nearing that 50 percent mark.

Bingham said that’s why the city is putting together a “work group” to come up with both those plans.

The short-term plan would be finding a solution within the next 30 to 45 days or sooner. One of the options being discussed is a program that would buy out some of these houses that cannot be rebuilt per this 50 percent rule.

The long-term plan would solve some of these issues programmatically. Among the changes would be a way to publicly disclose and warn people who are looking to buy a house in a flood-prone area that this something they will likely have to deal with in the future.

Can this potential buyout program solve both long-term and short term problems?

There are a lot of compelling reasons to consider a buyout program. First, it would help a group of homeowners who have been cornered into an impossible spot. Second, it would save anyone else from getting stuck in the same situation.

But there have been more flood problems in the past few years—not fewer. So, there is no evidence that flooding is going to be less of a problem in the city in the future. This makes a long-term buyout program a very expensive proposal, especially in a city such as Louisville.

Right now, according to MSD Executive Director Greg Heitzman, there are about 12,000 homes in the Metro area prone to floods. That includes homes near the river, and those that flood when Beargrass Creek and other tributaries overflow.

Leet said MSD officials haven’t been able to tell her how many of those homes are close to that 50 percent line, because they don’t yet know what that number is.

So, over the next few weeks,  information will be gathered about what the scope of this problem is and what they can feasibly do to fix it.

Finally, the city isn’t interested in opting out of this 50 percent rule because the city would no longer be included in the national flood insurance program. If that happens, flood insurance in the area could spike for everyone.

If city officials don't find a way to deal with this problem for the residents already affected, a lawsuit could be in the works.

Attorney Ben Carter said he's already been contacted by some residents of the Riviera neighborhood about what he calls a "frustrating and urgent situation."

"We are exploring all legal actions at this time," he said.