Long Beach Island Real Estate: How Flood Elevation is Driving Investment Winners and Losers

Written by:

Rudi Davis

Date:

13 Feb 2026

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Building code compliance is creating sharply different investment outcomes for coastal properties, even when those homes sit just feet apart. Edward Freeman Jr., Managing Partner at The Freeman Group, says the key factor is whether a property is built above or below the base flood elevation. This technical detail can mean the difference between paying $1,200 or more than $10,000 per year for flood insurance.

Two-Tier Market Emerges

In coastal markets such as Long Beach Island, New Jersey, the financial impact of elevation is especially pronounced. Homes constructed above base flood elevation typically qualify for federally subsidized flood insurance rates. “If it’s a home built above the base flood elevation, our flood insurance is pretty nominal,” Freeman says, with annual costs in the $1,200 to $2,000 range. These rates are possible because the federal government subsidizes insurance for properties that meet current standards.

Properties below base flood elevation, however, face much higher premiums—often several times the cost of compliant homes. Freeman explains that buyers of these properties must make a tough choice: pay the higher insurance premium, invest in raising the home, or rebuild entirely to meet current codes. “Someone that’s buying a house that’s below base flood elevation has to make a decision: are they going to build a new house, raise that house, or are they okay paying the higher premium?” he says.

Insurance Costs

This dynamic has created a two-tier market in coastal areas. Properties built to code benefit from manageable insurance costs and, in Long Beach Island’s case, an AAA insurance rating that further lowers premiums. Older homes, or those not built to current standards, face much higher costs, which directly affect both buyer demand and long-term investment returns.

Local Regulations

For investors evaluating rental or income properties, the insurance differential fundamentally alters return calculations. Freeman notes that on Long Beach Island, it’s not enough to consider cash flow alone; insurance costs can erode profitability on non-conforming properties. “You have to look at the total return and not just the cash flow,” he says, emphasizing how insurance premiums can make or break an investment.

Proposed Legislation Could Raise the Stakes

Long Beach Island maintains its favorable insurance rating in part because local regulations require new construction to meet strict elevation standards, verified through certificate of occupancy requirements. This gives newer properties a built-in economic advantage, regardless of other factors like location or cosmetic condition.

The regulatory environment may soon widen the gap between compliant and non-compliant properties. Freeman cites proposed legislation in New Jersey that would increase required elevations by 4 feet in coastal zones. If enacted, this change would shift the baseline for insurance rates and building requirements, potentially causing many properties that are currently compliant to fall below the new standard.

Developers and Investors Adapt to Rising Risks

Freeman’s firm is closely monitoring the proposed changes. If the new regulations take effect, the cost to build new homes will rise because foundations must be raised, and properties that were previously considered up to code could suddenly face much higher insurance premiums. This regulatory risk is already affecting developer activity. Freeman observes that some builders are stepping back from development because fewer properties are available and prices for those that do become available are higher, a trend driven by low inventory and rising demand.

Elevation Compliance

For investors looking to navigate these complexities, Freeman advises focusing on premium properties, oceanfront, ocean block, bayfront, and oversized-lot homes. These “blue chip” properties, as he calls them, tend to appreciate fastest in strong markets and are most resilient during downturns. While Freeman doesn’t explicitly link this advice to elevation compliance, the underlying connection is clear: premium properties are often newer and built to current standards, giving them the insurance cost advantage that drives better investment returns.

Elevation is shaping not only individual investment decisions but broader market trends. Despite regulatory uncertainty and sharply different insurance economics between newer and older properties, Freeman expects prices on Long Beach Island to continue rising over the next 12 to 24 months. Rather than deterring buyers, he says, these complexities are being absorbed into higher valuations as demand continues to outpace supply.

Looking Ahead

For anyone investing or developing in coastal markets, Freeman’s experience highlights the importance of understanding flood elevation requirements and their insurance implications. A difference of a few feet in elevation can mean thousands of dollars in annual costs, which add up significantly over the life of a property. In today’s market, technical compliance with elevation standards is as critical to investment success as location or property condition.

As coastal regulations tighten and insurance costs continue to diverge, the line between viable and risky investments will become even sharper. Investors who pay close attention to elevation — and the shifting regulatory landscape — will be better positioned to avoid costly surprises and maximize long-term returns in an increasingly complex coastal market.