The alta acqua is a very common occurence in the lagoon. It happens most often in winter. The phenomenon requires a high tide and a north-blowing wind and has been recorded for centuries, although the fact that Venice is sinking at the rate of 7 centimeters a century hasn't helped things lately.
As to water damage, most Venitian homes' ground floors are abandoned, and the cafes around Piazza San Marco have "waterproof" ground floors. They move the guests up to the second level and continue with the serving of overpriced drinks and food. After the tide has passed the staff squeegee and mop up. I'm not sure what happens to San Marco - the ground floor is even with the piazza, so I guess the water just rolls right on in.
Venice is a sad place in some ways; it is losing population and many buildings there are empty - completely empty. If you want waterfront property in a town with no economy other than tourism, kitschy glass object blowing and lacemaking, Venice is it.
http://www.learnersonline.com/weekly/archive2K/week33/