Who funds disaster recovery?

When disasters strike, affected communities face immense challenges in rebuilding. Funding disaster recovery is complex, with money coming from various public, private and nonprofit sources. Securing sufficient funds is critical for restoring housing, businesses, infrastructure and services. This article examines key questions around disaster recovery funding.

How is disaster recovery funded in the United States?

There is no single dedicated fund for disaster recovery in the U.S. Instead, funding comes from multiple sources at the federal, state and local levels. Key sources include:

  • Federal disaster assistance programs, mainly through FEMA and HUD
  • State disaster relief funds
  • Local government budgets and bonds
  • Private insurance payouts
  • Philanthropic donations through charities and foundations

FEMA provides the majority of federal disaster recovery grants. FEMA administers the Disaster Relief Fund, which Congress funds through emergency supplemental appropriations. FEMA disburses those funds through programs like the Public Assistance Grant Program and Hazard Mitigation Grant Program. From 2005 to 2014, the federal government provided over $275 billion total for disaster relief and recovery spending.

What does FEMA fund?

As the main federal disaster agency, FEMA administers a range of recovery programs. Key areas funded by FEMA:

  • Public infrastructure: Repair and replacement of damaged public buildings, roads, bridges and utilities.
  • Emergency response: Reimbursement to state and local governments for expenses like emergency protective measures.
  • Debris removal: Clearance of disaster-related wreckage and waste.
  • Hazard mitigation: Projects to reduce future disaster losses like elevating flood-prone homes.
  • Direct housing assistance: Temporary housing and repair assistance for homeowners and renters.
  • Preparedness grants: Funding and training to strengthen disaster response and planning capabilities.

The level of FEMA’s contributions depends on cost-sharing formulas and whether the president issues a disaster declaration. States typically receive 75% federal funding for public infrastructure repairs under major disaster declarations.

What other federal funding is available?

Beyond FEMA, other federal agencies provide significant disaster recovery funding, including:

  • HUD Community Development Block Grants (CDBG-DR): Grants to rebuild damaged housing, businesses and infrastructure, especially in lower-income areas. Over $30 billion in CDBG-DR funds went toward Gulf Coast recovery after Hurricane Katrina.
  • USDA disaster loans and grants: Assistance for rural homeowners and small businesses to repair and rebuild.
  • SBA disaster loans: Low-interest, long-term loans to repair homes, businesses and personal property.
  • IRS tax refunds: Refunds for casualty losses not covered by insurance payouts.
  • HHS social services grants: Funding toward health care, mental health and substance abuse treatment in recovering communities.

How do states support disaster recovery?

States contribute significant amounts to disaster recovery through emergency response funds, community development grants and special appropriations for catastrophic disasters. For example, New York and New Jersey together provided over $6 billion in state funds toward Hurricane Sandy recovery. States also deliver federal passthrough funds for housing, infrastructure and preparedness. Additionally, states support recovery through tax refunds and credits, disaster case management, and activating National Guard personnel.

What role do local governments play?

Local governments like cities, counties and school districts are often first responders after disasters and have major responsibilities in recovery. Local funding sources include:

  • Operating budgets: Redirecting funds from other priorities toward debris removal, infrastructure repair and recovery administration.
  • Tax increases: Raising taxes to generate additional recovery revenue.
  • Municipal bonds: Issuing bonds to fund long-term rebuilding needs.
  • Rainy day funds: Tapping budget reserves and emergency funds.
  • Development fees: Increasing fees on building permits, zoning applications and the like to support rebuilding departments.

Local nonprofits and businesses also provide resources through donations of time, goods and services following disasters.

What role does private insurance play?

Insurance is the primary mechanism for rebuilding privately-owned homes, businesses and vehicles damaged in disasters. Insured survivors receive payouts from policies like homeowner’s, flood, business interruption and auto insurance. However, insurance coverage rates are often low. Just 12% of at-risk homes nationwide have federal flood insurance, while many forgo earthquake and hurricane policies. Gaps in private insurance increase reliance on government and nonprofit disaster aid.

How do nonprofit organizations contribute?

Philanthropic funding from charitable organizations, corporations and foundations supports all aspects of disaster recovery:

  • Individual and household assistance: Donations and volunteers to rebuild damaged homes, replace possessions and meet basic needs like food, water and supplies.
  • Community programs: Grants and assistance for community health and wellbeing – including health care, mental health services and temporary housing.
  • Infrastructure: Contributions toward rebuilding damaged roads, public facilities and utility systems.
  • Preparedness and mitigation: Funding risk reduction initiatives like community education, evacuation planning and hazard mapping.
  • Local capacity building: Training, tools and technical assistance to strengthen local recovery practices and planning.

Some key national disaster nonprofits include Red Cross, Salvation Army, Americares, Direct Relief, Operation Blessing and Habitat for Humanity. Grantmaking groups like the Center for Disaster Philanthropy also channel large corporate and foundation donations toward recovery needs.

How is disaster recovery funded internationally?

Disaster recovery financing varies across countries based on resources and government structure. Sources include:

  • National and local government budgets: Many countries lack dedicated federal disaster funds, so recovery relies heavily on reassigning budget resources.
  • International aid: Grants from other national governments and global institutions like the World Bank, IMF and UN.
  • Multilateral climate funds: Mechanisms like the Green Climate Fund and Adaptation Fund support disaster risk reduction and resilience globally.
  • Private insurance: Property and business insurance penetration is generally lower in developing countries, though growing catastrophe insurance markets transfer some risks.
  • NGOs: Relief and development organizations provide important recovery project funding and expertise, often with foreign government support.

Many countries lack adequate disaster financing systems. The United Nations promotes disaster risk financing strategies to help governments identify funding sources, establish contingency funds and determine risk transfer options.

What are the challenges of disaster recovery funding?

Despite the range of funding sources, major challenges remain in securing and allocating recovery resources:

  • Inflexible bureaucracy: Navigating complex statutes, rules and bureaucracy delays funding disbursement.
  • Gaps in coverage: Available aid often falls short of total losses, leaving households and jurisdictions underinsured.
  • Inequitable distribution: Politically connected areas sometimes benefit disproportionately over highest-need populations.
  • Public fatigue: Donor and taxpayer fatigue can curb recovery funding, especially for repeated disasters.
  • Misaligned incentives: Pressures to spend funds quickly may result in waste, inefficiency and noncompliance.
  • Unpredictable political will: Fluctuating visibility, leadership priorities and special interests affect commitment to comprehensive recovery.

Addressing these challenges requires innovative funding models, stronger pre-disaster planning and greater equity in recovery decision-making.

How can disaster recovery funding be improved?

Some measures that could improve disaster recovery financing include:

  • Establishing dedicated federal and state disaster recovery trust funds for ready allocation when disasters strike.
  • Increasing buy-in for catastrophe insurance schemes like flood and earthquake coverage to reduce reliance on aid.
  • Developing disaster savings accounts and contingency lines of credit so jurisdictions can quickly access funds.
  • Adopting flexible recovery procedures and funding mechanisms tailored to each disaster type.
  • Investing more in pre-disaster mitigation to reduce long-term recovery costs.
  • Integrating social vulnerability analysis in funding decisions to direct resources to those most in need.
  • Improving transparency through detailed disaster accounting and expenditure tracking.
  • Encouraging coordinated partnerships across government, private and nonprofit sectors.


Rebuilding after disasters requires immense resources over sustained timeframes. While many funding sources exist, disaster recovery financing remains complex and often inadequate, especially for vulnerable populations. Smarter policies, risk-based investments and participatory decision-making can help channel funds more effectively toward resilient recovery. But political will and public engagement are essential to ensure adequate support exists when the next crisis strikes.