The cost of flood insurance is a large recovery barrier for people living in Eastern Kentucky flood plains, says a report by the Federal Reserve Bank of Cleveland.

Researcher Matt Klesta reported what locals have said: Flood insurance is too expensive for most residents. Also, floods have made affordable housing problems worse and driven locals from their homes, decreasing the available workforce.

The report, published in September, focused on the July 2022 floods and the 13-county federal disaster area. The water destroyed homes, displaced thousands of Kentuckians and killed at least 44 people. From July 26-30, 2022, up to 16 inches of rain fell, pushing creeks and rivers far out of their banks, according to the National Weather Service.

“The July 2022 flood was not the region’s first, nor will it be its last,” the researcher wrote. “It’s in these situations that close-knit communities with deep family ties to the land demonstrate their resourcefulness. However, despite eastern Kentucky’s resilience, its recovery is made more challenging by the decline of the coal industry, which has led to the loss of many well-paying jobs and a steady exodus of people from the region.”

Expensive to stay?

It’s expensive to stay. The new research says that homeowners insurance with a flood policy, on average, could cost a family in the affected areas 7% of their median household income. In the 13 most impacted counties, a flood insurance policy could cost $1,384? annually.

After receiving federal aid for flood damage, a property owner is required to have flood insurance or else be disqualified for future aid. ?The Federal Emergency Management Agency, which manages the flood insurance program, requires those who live in a high-risk flood area, known as a Special Flood Hazard Area, and who have a federal government-backed mortgage to have flood insurance. Those who also accepted aid from FEMA after floods — like thousands of households did in Eastern Kentucky after the 2022 floods — are also required to purchase flood insurance.

Few Kentuckians have flood insurance. Rate increases, announced earlier this year to make up for the program’s massive losses, are putting it even further out of reach.

The Fed report also shows that 74% of the some 9,000 damaged housing units were in Breathitt, Knott, Letcher and Perry Counties.

In the 13 flood-impacted counties, the report says, 37% of households, including 55% of renters, made less than $25,000 a year ?in 2021.

This is significant because “low-income households and renters are more likely to suffer permanent displacement because they often have fewer relocation options and lower-quality housing is more likely to be demolished instead of being rebuilt.”

Meanwhile, as people leave the area, the labor market suffers. The report shows that United States Postal Service residential vacancies increased by 19% from the third to the fourth quarter in 2022.

“Fewer residents mean fewer people available to fill jobs,” the paper states. And the construction industry has decreased by 24%, which further pauses housing recovery.

“This shortage of skilled trades workers, such as carpenters, electricians, and plumbers, has led to a backlog of people waiting to get their homes repaired or replaced,” the report found.

For the full report, “Resilience and Recovery: Insights from the July 2022 Eastern Kentucky Flood,” visit the site.