After Laura, People Need Assistance to Reduce Vulnerability

(Source: NASA Earth Observatory)

Hurricane Laura—one of the strongest storms on record to hit the United States—brought strong winds, heavy rain, and 12 to 18 feet of storm surge to parts of the Louisiana and Texas coasts. Many people in the five coastal parishes directly surrounding the landfall area (Acadia, Cameron, Calcasieu, Jefferson Davis, and Vermillion) lack flood insurance. In those parishes, only about 29 percent of households in the 100-year floodplain are insured under the NFIP, and in predominantly Black areas, only 20 percent of households had coverage.

Thousands of households are struggling to recover, and those without flood insurance will struggle even more. The ability of an individual or community to recover quickly is highly dependent on access to resources. Lower-income households and/or households of color are often less likely to purchase flood insurance, which means they do not have access to one of the most important sources of assistance available.

This is hardly unique to southwestern Louisiana, where Laura made landfall. Many low-to-moderate income families exposed to flooding are uninsured. As federal flood insurance policy premiums transition to rates that reflect actual flood risk, low-to-moderate income households could be “priced out,” choosing either to continue to forgo coverage or drop existing coverage if the cost becomes too burdensome. Assisting low-to-moderate homeowners and renters purchase and maintain flood insurance could help with near-term recovery.

Insurance is important to have to recover from a flood, however, having insurance does not stop the flooding from happening. People still have the lost possessions, the struggles of rebuilding their homes and lives, and the trauma of living with a disaster. That is why it is essential that low-income households also receive assistance to decrease their exposure to flooding. 

Flood insurance coverage can speed post-disaster recovery, but low-income households often are without coverage

The United States has a large flood insurance gap, where many people that are exposed to flood risk are not covered by flood insurance. According to FEMA, 5.1 million households are in the nation’s high-risk floodplains, but only 1.8 million of them have an NFIP policy.

The flood insurance gap is highest amongst low-to-moderate income households. FEMA found that more than 50 percent of households located in the 100-year floodplain that lack NFIP insurance coverage are considered low-income.

* Low-income is defined as having less than 80% of the Area Median Income

Also, the median income of households without flood insurance is only $40,000, slightly more than half that of households located in the 100-year floodplain that have flood insurance ($77,000). In comparison, only 41 percent of non-policy holders outside the 100-year floodplain are low-income, with a median income of $56,000. Such findings indicate that homeowners with a lower median income tend to live in higher risk flood areas. Thus, those that can least afford to pay for flood insurance also can least afford to be without it given their high level of risk.

Further, race can be a co-factor. A recent study of Hurricane Harvey found Black and Hispanic flood victims carried flood insurance at lower rates than whites. Maps of high-risk flood areas impacted by Hurricane Laura show a similar correlation.

In the figure below, the map on the left depicts the racial plurality of the Lake Charles area (the gray outline shows the city limits). The graph on the right depicts the percentage of NFIP flood insurance policies that are located in the 100-year floodplain, or what’s known as the “special flood hazard area.” Predominantly Black neighborhoods have a noticeably lower rate of NFIP insurance uptake in the 100-year floodplain.

NFIP policies: https://www.fema.gov/openfema-data-page/fima-nfip-redacted-policies (using active residential policies only, as of August 31, 2019)
Housing units (total and within in the Special Flood Hazard Area): https://furmancenter.org/floodzonedata/data
Race: https://data.census.gov/cedsci/, American Community Survey 5-year estimates, 2018
Lake Charles city boundaries: https://ladotd.maps.arcgis.com/home/webmap/viewer.html?webmap=decbca3c30...

All data shown at the Census tract level

Access to affordable flood insurance assistance could address equity issues and close the insurance gap

The NFIP’s current method for discounting insurance premiums is unrelated to a property owner’s or renter’s income level. Instead, the majority of subsidized insurance policies are for older buildings that pre-date when their communities’ first flood insurance rate maps (FIRM) were created. Subsidization does not directly correlate to assisting low-to-moderate income homeowners afford flood insurance coverage; discounts are neither means-tested nor targeted at lower-income households.

In contrast, the Government Accountability Office (GAO), in a 2013 report, found that “counties with higher home values and income levels tended to have larger percentages of remaining subsidized policies compared to those with full-risk rates.” Per the 2013 GAO report, the median home value for more than half of counties with more than 75 percent of nation’s subsidized policies was in the top quartile of counties nationwide.

As policy premiums transition to rates that reflect actual flood risk, the already existing equity gap in NFIP coverage will likely expand. Low-to-moderate income households could be “priced out,” either choosing to continue to forgo coverage or drop existing coverage if the cost becomes too burdensome.

Congress must act to create a means-tested affordability mechanism to address this growing flood insurance gap amongst low-to-moderate income households. For example, Congress could provide subsidies based on income level. Homeowners with an income below the Area Median Income (AMI), could receive a certain percentage off their full-risk flood insurance policy. However, the discount must be outside the policy premium. Policies must continue to move towards rates that reflect actual flood risk to ensure the true risk of flooding is accurately presented to homeowners and renters.

Affordable insurance must be coupled with options to mitigate risk

Affordable insurance is a near-term solution, but it does not reduce physical risk. Due to climate change, floods will increase in frequency and severity. While assisting more people to obtain or maintain flood insurance could help them recover faster after a flood, insurance will not make them safer from flooding.

Any means-tested affordability mechanism must be coupled with providing low-to-moderate income households greater access to mitigation assistance. Possible mitigation assistance could include:

  • Provide qualifying NFIP policyholders the option of a guaranteed buyout as an alternative to an insurance payout if the property is substantially damage
  • Providing qualifying NFIP policyholders a higher amount of Increased Cost of Compliance (ICC) assistance to cover the costs of elevation, relocation, and expanding the eligible activities that can be completed with ICC benefits, such as buyouts
  • Provide qualifying NFIP policyholders access to low- or zero-interest loans to fund mitigation projects. For very low-income families, provide grants for mitigation projects

Requiring greater mitigation assistance, in addition to more affordable insurance premiums, is an equitable way to assist low-to-moderate income households. Reducing a home’s exposure to flooding will not only better protect the residents, but could also reduce the cost of insurance for the homeowners over the long-term. 

About the Authors

Joel Scata

Water and Climate Attorney, Water Initiatives, Healthy People & Thriving Communities Program

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