Why St. Louisans Could Have Different Recoveries after Flooding

September 14, 2022

During the early morning hours of July 26, 2022, the St. Louis metropolitan area was pummeled by a historic storm. A cluster of thunderstorms concentrated rain over the same region, and upwards of 11 inches of rain—what St. Louis gets on average for July and August combined—fell over the course of roughly eight hours. Rainfall of this magnitude is an event that the National Weather Service says has a 1 in 1,000 chance of occurring in a given year.

Dangerous flash flooding ensued in some areas of St. Louis where the stormwater management system lacked capacity. In addition to several lives lost, the Office of Missouri Governor Michael Parson reported that the flooding “resulted in major damage to over 750 homes, over 130 businesses and led to at least $35 million in damage to uninsured infrastructure and emergency response costs.” Two days later, historic Kentucky flash floods struck Appalachian communities, leaving 39 dead and destroying over 1,600 homes.

People are affected differently by disasters, and recovery from the financial losses also is uneven: Our research with a colleague found that federal disaster assistance doesn’t make up for inequalities in place before a disaster. How can communities like St. Louis try to keep disasters from making those pre-existing disparities worse?

Financial Losses and Housing Insecurity after Disasters

The destruction of homes, or damage to them, can be particularly devastating as it can lead to housing insecurity (flood-damaged homes are often uninhabitable until repairs can be made) and the loss of household wealth in the form of the home (if owned) and damaged possessions within.

Sharon Franklin, an East St. Louis resident, spoke with St. Louis Public Radio and described what happened to her home, saying, “It has mold, water damage, and I didn’t know that a tree fell in the backyard and took out the whole porch and back end of my home.” Franklin added, “Then, the mold—you smell it when you walk in. Everything is just lost.”

As the St. Louis area recovers from this disaster and in case of another one, the word “equity” will be top of mind for many. Indeed, research has found lower-income households have longer recovery times, and the gap between Black and white wealth expands over time after disasters strike a county.

Communities could work towards a disaster response system that adjusts based on need, allowing people of all walks of life to recover their previous standards of living. But, beyond a focus on responsive equity, communities might also consider how to achieve structural equity. Specifically, how can communities work to prevent families with less wealth from being priced out of areas that are best protected from flooding? The answer likely requires a reimagining of the built environment in some places. These actions could yield long-term benefits in the form of less disaster aid needed in the future.

What Financial Support Can Flood Victims Potentially Receive?

Flood insurance is one of the best forms of assistance available for rebuilding after a catastrophic flood. Homeowners with a mortgage who live within a 100-year floodplain are typically required to have flood insurance coverage. However, beyond that scenario, it’s uncommon for people to have it.

Beyond flood insurance, there are three sources of federal assistance for households impacted by a storm: Federal Emergency Management Agency (FEMA) grants, Small Business Administration (SBA) disaster loans and Internal Revenue Service (IRS) disaster refunds.

What Hurricane Harvey’s Aftermath Tells Us about Who Recovers Quickly

With Stephen Billings, an associate professor of real estate at the University of Colorado Boulder, we explored the aftermath of flooding caused by Hurricane Harvey and its effects on residents of Houston, Texas. Prior to our study, a lot of research found that natural disasters had relatively short-lived impacts on communities. After aid was distributed, residents managed to bounce back and recover financially. However, this was at odds with local reporting that found people dealing with profound hardship, sometimes years after the storm had come and gone.

We found in our study that both of these situations can be true: Most of the Houston residents did bounce back, but there were some who continued to suffer long after the storm. Those who did continue to feel the financial effects were those who lived in areas that weren’t expected to flood and who were in weak financial positions right before the storm.

Assistance to Low-Income Families Can Fall Short

Research has shown that factors such as a low credit score or low income can lead to significant inequities in lending for recovery. Where flood insurance is lacking, individuals and families who have these financial constraints may not receive enough federal aid to recover from the damage to their homes.

For example, SBA loans require a credit check prior to approval and FEMA grants fall short of covering the full financial cost of flood damage. Additionally, the amount of assistance offered through IRS disaster refunds is proportional to the amount of income tax paid. For low-income families, this will likely be insufficient to cover much of the flood damage.

After Hurricane Harvey: Households in Better Financial Shape Were More Likely to Receive Federal Aid

Bar graph shows that the share of FEMA registrants approved for an SBA loan or a FEMA IHP grant after Hurricane Harvey was greater for those with higher credit scores.


Bar graph shows that the share of FEMA registrants approved for an SBA loan or a FEMA IHP grant after Hurricane Harvey was greater for those with higher median incomes.

SOURCES: “Let the Rich Be Flooded: The Distribution of Financial Aid and Distress,” by Stephen Billings, Emily Gallagher and Lowell Ricketts, accepted in November 2021 for a forthcoming issue of Journal of Financial Economics. Data from FEMA, New York Fed/Equifax Consumer Credit Panel and Census Bureau.

NOTES: Graphs show the share of FEMA registrants approved for an SBA loan or a FEMA Individuals and Households Program grant by median income and Equifax risk score of the Census block. A higher Equifax risk score indicates an individual is considered a lower credit risk.

Improving the Built Environment and Financial Resilience

The historic flooding in St. Louis inundated households across the region, from relatively affluent neighborhoods to those with less financial resources. Differences in financial constraints, coupled with an uneven federal aid landscape, can lead to different recoveries (or a lack thereof) for families. State and local governments, nonprofits and philanthropic organizations can potentially help fill shortfalls between federal assistance and the damage wrought by the storm, thus achieving a responsive form of economic equity.

Policymakers and community stakeholders might aspire towards a structural form of equity as well.

  • Expanding the capacity of the stormwater management system and reducing nonporous surfaces in communities could help prevent flooding.
  • To help prevent property loss, governments could incentivize residential construction in better protected areas and buy out areas that flood repeatedly to convert the grounds to other uses.
  • Helping St. Louisans improve their financial resilience would allow residents to take better advantage of federal aid programs and help prevent forms of financial hardship (e.g., housing insecurity, loss of transportation) following a disaster.

Greater financial resilience might take the form of more earnings capacity to build up emergency savings or credit building to boost access to mainstream credit products (including those SBA disaster loans).

Achieving structural equity would require a lot of planning and resources today. However, over the long term, it might pay dividends and could make St. Louis stronger and more resilient.

About the Authors
Lowell Ricketts
Lowell Ricketts

Lowell R. Ricketts is a data scientist for the Institute for Economic Equity at the Federal Reserve Bank of St. Louis. His research has covered topics including the racial wealth divide, growth in consumer debt, and the uneven financial returns on college educations. Read more about the author and his research.

Lowell Ricketts
Lowell Ricketts

Lowell R. Ricketts is a data scientist for the Institute for Economic Equity at the Federal Reserve Bank of St. Louis. His research has covered topics including the racial wealth divide, growth in consumer debt, and the uneven financial returns on college educations. Read more about the author and his research.

Emily Gallagher
Emily A. Gallagher

Emily A. Gallagher is a visiting scholar at the Institute for Economic Equity at the St. Louis Fed. She is also an assistant professor of finance and real estate at the University of Colorado at Boulder.

Emily Gallagher
Emily A. Gallagher

Emily A. Gallagher is a visiting scholar at the Institute for Economic Equity at the St. Louis Fed. She is also an assistant professor of finance and real estate at the University of Colorado at Boulder.

This blog explains everyday economics, consumer topics and the Fed. It also spotlights the people and programs that make the St. Louis Fed central to America’s economy. Views expressed are not necessarily those of the St. Louis Fed or Federal Reserve System.


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