On March 20, 2023, the State of New Jersey passed one of the nation’s strongest flood risk disclosure laws.

The Rise to Resilience (R2R) Coalition spearheaded advocacy efforts that led to the State of New Jersey passing one of the nation’s strongest flood risk disclosure laws on March 20, 2023. Across the country, 29 states have some form of flood risk disclosure laws in the books. New Jersey will become the 30th, once the bill is signed into law by Governor Murphy.

In some states, like South Carolina, flood disclosure is handled on the regulatory side (through the state’s real estate commission) while others, like Texas and now New Jersey, have taken the legislative avenue.

In New Jersey, the flood disclosure bill passed the State Senate and State Assembly, both, with unanimous votes (36-0 and 78-0, respectively). This unanimous passage in both houses showcases the widespread, bipartisan support in the legislature. State Senator Bob Smith and Assemblymember James Kennedy were the primary sponsors of the bill, with several additional co-sponsors on both sides.

Additionally, as the lead Coalition partner in the efforts to pass this legislation, New Jersey Future secured meetings with the New Jersey REALTORS® and New Jersey Apartment Association and served as the local expert for navigating the legislation to victory.

In a state where flood risks are high, like New Jersey, disclosure laws are an important first step to understanding how you might be impacted by climate change. These laws are designed to raise awareness about climate risk, enhance consumer protections in real estate transactions, and help change patterns of behavior related to flood insurance. Flood disclosure is critical for awareness and transparency surrounding flood risks, especially because there is no other mechanism that requires potential homebuyers and renters to be made aware of any prior flood damage to a property.

In theory, the Federal Emergency Management Agency (FEMA) would be the ideal entity to share a property’s flood history but because of the Privacy Act of 1974, the agency is legally not allowed any “personally identifiable” information in their records – including flood damages or insurance claims.

This roadblock leaves statewide flood disclosure as the strongest tool for revealing these flood damages. Flood disclosure laws are dubbed as flood risk “right to know” laws, precisely because that is the foundation of the law – providing buyers and renters the right to know the potential risks and costs they might be taking on if purchasing a flood prone home.

A robust flood disclosure law, like New Jersey’s, will require home sellers and landlords to respond to a series of questions in a form that is shared with the prospective buyer and renter. These questions include:

• Whether the property is in a designated floodplain (100-year or 500-year FEMA flood zone)
• If the property ever experienced any flood damage, water seepage, or pooled water due to a natural flood event, such as heavy rainfall, coastal storm surge, tidal inundation, or river overflow. If so, how many times?
• Whether the property is required by law to maintain flood insurance; and information pointing to online and updated future flood projection maps and data.*
• If the property ever received assistance from FEMA or any other federal disaster flood assistance for flood damage. *
• If there is a FEMA elevation certificate available for the property. *
• If a claim for flood damage to the property with any insurance provider, including the National Flood Insurance Program has been filed. *
• If the property is located in a designated wetland. *

* Indicates disclosure for homebuyers, not renters.

New Jersey is faced with threats from coastal flooding (e.g.., tropical storms, hurricanes, nor’easters, sea level rise, and storm surge) and stormwater flooding in both coastal and inland communities (i.e., more frequent, and intense precipitation events). Flood vulnerable communities have repeatedly expressed concerns regarding the growing costs of flood damage in their homes, as well as never being warned about the risks they face when moving into a new home.

Source: Estimating undisclosed flood risk in real estate transactions, Milliman

Last fall, R2R partner, The Natural Resources Defense Council (NRDC), commissioned a study to analyze the hidden costs associated with purchasing a home with a flood history in New Jersey. Key finding from the report found that “the average home in New Jersey with prior flood damage has an expected average annual loss of $1,678, compared to $104 for the average home.” Over the course of a 15-year mortgage, average expected damages to the previously flooded home equate to $25,175 (in today’s dollars); for a 30-year mortgage the damages equate to $50,351.

Additionally, in New Jersey, 7,944 homes were purchased in 2021 that were estimated to have been previously flooded. The expected annual flood damage for these sold homes were estimated to be over $18 million.

These costs showcase the value of strong flood disclosure laws and how they can inform buyers and renters of the potential costs they may unknowingly be walking into. New Jersey’s own Statewide Climate Resiliency Strategy references flood disclosure as a law that would “further resilience” and “allow potential buyers to fully evaluate monthly mortgage costs and weigh the disaster recovery costs prior to making an offer on a property.”

Waterfront Alliance and the Rise to Resilience Coalition applaud the New Jersey legislature for continuing to take swift and bold action on climate change. This law is not only the strongest in the nation, but far and away the strongest in the region – setting up neighboring states to follow suit.

The bill’s long overdue reforms will ensure that Jersey homebuyers and renters are able to make a more informed decision about the risks of flooding so that they can protect their belongings and families.