How Federal Flood Insurance Puts Homes at Risk
By
AUG. 31, 2017
It was clear long before Hurricane Harvey slammed into Texas that the National Flood Insurance Program, the government’s most important means of recovering from such disasters, needed to be overhauled. It fails to account for the full extent of flood risk, encourages development in areas known to be flood-prone and is not realistically funded.
Congress created the program in 1968 after most private insurers stopped selling flood policies or began charging very high premiums because the business had become too risky.
In recent years, the staggering costs of storms like Katrina and Sandy have left the program, which has
, with a nearly $25 billion debt to the federal government.
Congress is to blame for this. It requires the Federal Emergency Management Agency, which administers the program, to subsidize premiums, but has not provided it with money to do so. Reform efforts in recent years have fallen short, but lawmakers have another chance to fix the program, which will lapse if not
.
The biggest change would be to have premiums reflect the actual overall risk. Previous attempts to quickly increase their cost over just a few years faltered after policyholders and their elected representatives pushed back. If Congress is unwilling to raise premiums, it ought to properly finance the subsidies.
A more realistic approach would be for lawmakers to offer incentives to homeowners and cities to reduce the number of homes at risk of catastrophic flooding. Congress could direct FEMA to help cities buy out homes that have flooded repeatedly. The
estimates that the government has spent about $5.5 billion since 1978 to rebuild 30,000 homes that have flooded as many as five times in a two- or three-year period. The group estimates that buying many of these homes would cost less than the government spends in rebuilding them over and over. FEMA does finance buyouts but it spends vastly more to rebuild properties.
The program could also offer policyholders more money to raise their homes above flood elevations. It now offers up to $30,000 for such improvements, but experts say costs can be two or three times more than that.
More important, not just for the program but for the cost that disasters pose to the country, would be to properly finance a full updating of flood maps, which establish the 100-year flood plain where homes have at least a 1 percent risk of flooding in any given year. Homeowners with properties in those zones are required to buy flood insurance if they have mortgages. The maps do not take into account climate change’s effect on
and
, and ignore the risks posed by real estate development. This gives homeowners a false sense that they are not at risk from flooding. (Even the 100-year flood concept might need to be updated to reflect greater risk to people living outside the zones.)
The insurance program could also provide home buyers better information about properties’ flooding history. Now, the first time many people learn that their new homes are flood-prone is the first time they see their living room underwater. FEMA should also be required to provide aggregate information about flooding risks to local governments and the public, so they can better prepare for storms.
Finally, lawmakers ought to wipe out the debt the flood insurance program owes to the government. It is inconceivable that FEMA would ever be able to repay the Treasury for past disasters,
. It makes no sense to let that number swell, which it surely will once the claims from Harvey are tallied and paid out.
Congress clearly cannot eliminate the threat that natural disasters pose to the country. But it can do a much better job reducing the risk that storms like Harvey pose to life and property.
