reuters.com
(2/4/2013 7:46 PM, Hilary Rus)

New York state could spend up to $400 million of its federal recovery money to buy out property owners whose homes were destroyed during Superstorm Sandy, a governor's administration source said on Monday.

New York Governor Andrew Cuomo proposed the program nearly a month ago in his State of the State address. At the time, he didn't provide a price tag, but a person familiar with the matter, who spoke on condition of anonymity, confirmed the estimated cost on Monday. It was previously reported by the New York Times and the Christian Science Monitor.

The cost would ultimately come out of New York's portion of the $50.5 billion disaster relief package passed by Congress last month. The state could also get some money for the program from federal Community Block Grants.

The plan, which still needs federal approval, would be funded out of the U.S. Housing and Urban Development's allocation of Sandy recovery aid.

Under some such programs, homeowners are relocated, their land left as a natural barrier to help mitigate future floods.

New York State Comptroller Thomas DiNapoli, who lives on Long Island, said last week that his office was still analyzing Cuomo's buyout proposal.

"Folks like to live by the water," he said, speaking as a Long Islander. "It becomes a very personal decision."

Federal Emergency Management Agency funds have been used for years to purchase properties in flood-prone areas across the United States, particularly those near rivers.

fter the Red River flooded 8,600 homes in Grand Forks, North Dakota in 1997, FEMA -- working with state and local governments -- bought out about 700 homes.

When the Red River flooded next in 2006, losses had dropped to $6.5 million from $3.7 billion during the flood nearly a decade earlier, according to FEMA.