Portland Flood Insurance Study

A partnership between the Wharton Risk Center Policy Incubator, Reed College, and The Portland Housing Bureau

The Lents and Powellhurst-Gilbert neighborhoods of Portland, Oregon routinely suffer flooding from Johnson Creek. The City of Portland has been actively engaged in helping control flooding in these neighborhoods, through floodplain restoration projects and green streets to manage stormwater.

Roughly 600 buildings in these neighborhoods are mapped into the 100-year floodplain (shown in blue on the map). This means that if they have a mortgage from a federally backed lender they must purchase flood insurance.

For many low and middle income families in these neighborhoods, flood insurance costs are becoming unaffordable due in part to elimination of insurance discounts by the National Flood Insurance Program. The Portland Housing Bureau developed an innovative program, the Flood Insurance Savings Program, to help lower the costs of flood insurance and improve flood resiliency in these neighborhoods.

Overview of the Study

The study team, comprised of researchers from the Wharton Risk Center Policy Incubator, Reed College, and the Portland Housing Bureau, launched a survey of residents in the Lents and Powellhurst-Gilbert neighborhoods in the summer of 2018. This survey was designed to improve our understanding of three interrelated issues regarding flood insurance:

Flood insurance literacy. Do individuals understand flood insurance? Do they understand the key features of their policy? Do they think that flood damage is covered under their homeowners insurance policy? Do they understand the risk management role flood insurance can play for them? Do they know about the National Flood Insurance Program and its requirements for purchasing coverage?
Willingness-to-pay for flood insurance. How much are individuals willing to pay for a flood insurance policy? At what price point would they choose to forgo flood insurance rather than pay the premium? How does price sensitivity vary with income and the nature of their current flood risk?
Flood risk perceptions. Do people have accurate understanding of their flood risk? How does their perceived risk of flooding compare with experts’ estimate of their flood risk? Do they understand both the likelihood of a flood and the potential damages to their home and belongings? How do perceptions vary based on sociodemographic characteristics of the individual, their past experience with floods, and the information they have received about floods from various sources?

Findings

Kousky, C., Netusil, N.R., and Moldovan-Trujillo, G. (2020). The Mispricing of Flood Insurance: A Look at Portland, Oregon. Wharton Risk Center Issue Brief. December.

Netusil, N. R., Kousky, C., Neupane, S., Daniel, W. and Kunreuther, H. (2020). The Willingness to Pay for Flood Insurance. Wharton Risk Center working paper. Forthcoming Land Economics (accepted August 7, 2020; anticipated publication date November 2021). Available at SSRN #3703019

Sherman, J. and C. Kousky (2018). Local Solutions to Flood Insurance Affordability: Portland’s Flood Insurance Savings Program. Wharton Risk Center Issue Brief. November.

Flood Insurance Savings Program

The Portland Housing Bureau teamed up with the nonprofit group Enhabit to help lower flood insurance costs for residents of the Lents and Powellhurst-Gilbert neighborhoods.

Participating households will get a home audit from Enhabit and an elevation certificate (paid for fully by the city or at a reduced rate, depending on income). For homes that are at sufficient elevation, the annual cost of insurance could be reduced substantially. The households will get a consultation with an insurance agent that specializes in flood to help them realize these savings.

Read more about the program in our Policy Brief, Local Solutions to Flood Insurance Affordability: Portland’s Flood Insurance Savings Program.