Should You Buy a Home Damaged By Flood?

On Monday, July 8, 2013, the city of Toronto experienced one of its worst-ever recorded natural disasters. At Pearson International Airport, 123 mm of rain fell that day, a record surpassing even the amount came down during the infamous Hurricane Hazel-influenced storm in 1954. The downpour flooded homes and streets, knocked out power for some 300,000 Toronto Hydro customers, and even trapped a train full of commuters for seven hours in the Don River valley. Total damages were estimated in the range of $1 billion. Weeks earlier, towns and cities across Alberta were decimated by flooding that killed four, displaced 100,000 residents, and caused billions in damage.

A year later, what can we learn from these floods? For one, be careful where you choose to buy a home.

Crisis in Calgary: The Long-Term Effects

While Toronto-area residents were getting waterlogged, Albertans were already starting the process of cleaning up their own flood-related mess. While most of the damage has been cleared by now, it wasn’t until this spring that one long-term impact became apparent: some once-trendy riverside neighbourhoods are no-longer desirable.

In a moderated panel discussion on the Calgary Herald’s website, Calgary-based real estate agent Tanya Eklund said, “I definitely feel buyers will be very hesitant to buy in the flood zone areas. My husband and I were considering Roxboro and East Elbow Park and now we have struck those two areas off our list.”

Another agent, quoted in a story in the Globe and Mail, said that the real estate market in neighbourhoods along the Bow River is “going to take a long time to heal.”

That said, some are trying to capitalize on the depressed market prices. In the same Globe article, a lawyer who purchased a “bargain” $1-million home, estimated the same place would have cost hundreds of thousands more prior to the flooding.

"If there’s another massive flood this spring, I’m an impetuous fool. And if there isn’t, then I’m a real-estate genius,” he said.

Underinsured for Over Land Disaster

According to a report commissioned by The Co-Operators, more than 70% of Canadians assume they’re covered for “over land” flood damage. The fact is, they’re not. While most insurance policies provide coverage for sewage backups – or offer this coverage as an additional rider – Canada is the only one of the G8 countries with insurance policies that do not include the kind of flooding experienced in Alberta and Toronto last year.

In the event of a major natural disaster, the federal and provincial governments may provide assistance for those affected, but it’s not as simple as calling up your insurance agent and having them cut you a cheque.

Buyer Beware of Flood Regions

Given that you’re not covered in the event of flooding, where you choose to live could have significant consequences.

Whenever my wife and I have been in the hunt for housing, one of my deal-breakers is where a house is located. Our neighbourhood in the west end of Toronto is fairly hilly, with several streets where the backyards drop off into steep slopes. There were a few homes that we might have considered, but I’ve immediately scratched off the list because they were located at the bottom of one of those slopes. And I’m glad we did. Our home sits on a high point of our street. I recall sitting on our sheltered front porch last July with our girls watching waves of water wash down the road. It was only later that I learned that cars parked at the very foot of our street were submerged up to their windows and the basements of the houses those cars sat in front of were filled with several feet of water.

In short, when trying to find your dream home, I suggest keeping the lay of the land it sits on as a key criterion.

Lessons Learned from Flood Damage

During the flooding from Hurricane Hazel, the hardest hit area of Toronto was a street called Raymore Drive along the shore of the Humber River. The overflowing river washed away 14 houses built on the river’s floodplain, killing 35 occupants trapped inside. After the damage was cleared, the city expropriated the land and turned it into a park, and passed a prohibition on building homes in floodplains. It remains to be seen if Calgary and other Alberta towns along the province’s major riverways will enact similar laws.