Our National Flood Insurance Program Is Going Underwater

Climate change is causing more floods and more damage along our coasts and our inland waterways. It’s not only sinking people’s homes, but sinking our country’s disaster response budget.

CH Knox/iStock

Imagine you’ve just accepted a job far from home, and you’re in the market for a new place to live. Now imagine that job is in a coastal area. You may be craving a waterfront view, but you’ll likely also want to avoid flood-prone properties, right? Good luck. Depending on the state, sellers often don’t have to disclose whether a home has flooded. Neither do private or public insurers, including the National Flood Insurance Program (NFIP)—the troubled program that funds repairs to millions of our nation’s waterlogged homes.

The NFIP, in its current state, is failing. It’s $24 billion in debt because it pays out more to rebuild homes in the wake of flood disasters than it collects in insurance premiums, which places a burden on taxpayers. In some cases, it leaves home buyers blind to dangers. And it can trap the current owners of flooded homes, offering little assistance to willing residents who would like nothing more than to relocate to a safer spot.

“The nation needs a National Flood Insurance Program that helps, rather than hinders, people’s efforts to move to higher ground, particularly in light of sea-level rise and climate change,” says Rob Moore, a senior policy analyst in NRDC’s Water program. “The flood insurance program keeps paying to rebuild their property over and over, while leaving them in harm’s way.”

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The situation’s only going to get worse. Warming seas and shifting precipitation patterns are causing more severe floods to happen more frequently. In the coming decades, some 4 million to 13 million more people will be living in flood-prone homes along our coasts, not counting the growing number of people at risk along inland waterways. Just last year, for example, record-breaking storms in central Louisiana inundated the homes of thousands of residents. Most didn’t have flood insurance, because flood maps for the area excluded their homes from zones where residents are required to buy flood insurance. Those floods exposed how outdated our flood maps can be and how none account for the realities of climate change.

Now back to your hypothetical relocation quandary, so you can see how this process plays out for owners. Let’s pretend you unwittingly buy a flood-prone home—but smartly purchase coverage through the NFIP, just in case. A year later, a storm surge puts two feet of water in your house, causing $30,000 in damage. After the flood, you file a claim and the NFIP writes you a check allowing you to repair your property. You chalk up the experience to bad luck. It probably won’t happen again. But it does, two years later. And three years after that, it floods again. These floods cause damage totaling more than half your home’s value. You have insurance, so you’ve received money to repair and rebuild, but insurance doesn’t pay for time away from work as you clean up, nor does it prevent your kids from missing school or restore your family photos and other irreplaceable personal items lost in the floods.

New Orleans, August 2005

Jocelyn Augustino/FEMA

At this point, you want out of your soggy home forever. But how? A house that floods repeatedly is not easy to sell. You still owe money on your mortgage, and after three floods, your property value has probably deteriorated. You live in a state that doesn’t require you to divulge your home’s history of flooding. Do you tell your real estate agent or prospective buyers that it floods constantly? Maybe not—as that would probably decrease the price further. Say you finally get that much-desired offer. As a new, unsuspecting family moves in, the cycle of flooding, insurance checks, and repairs restarts.

Let’s rewind for a moment, because the NFIP isn’t fundamentally a bad idea. When it was launched in 1968, the program represented a major step forward. Offering government-backed flood insurance policies—and eventually requiring owners of flood-prone homes to buy in—the NFIP streamlined the recovery process. Through its insurance premiums, homeowners began contributing to the cost of rebuilding, and, in return, assistance became a matter of right rather than a political decision made by governors and presidents. But insurance premiums for some of the most flood-prone homes were heavily subsidized, and the program offered relatively little funding to help homeowners mitigate the risks of flooding.

Now, climate change is adding further insult to injury by increasing the likelihood of flooding in many areas of the country. Already some 30,000 NFIP-insured homes flood repeatedly. Although they represent just 0.6 percent of the five million insured properties, they have received almost 10 percent of NFIP payments. On average these properties have flooded five times in the past 15 years.

To provide some relief, both the federal government and many localities have programs to buy flood-damaged homes. But the process is often excruciatingly slow and bureaucratic. In scenarios where the Federal Emergency Management Agency (FEMA) makes post-disaster funding available to states and communities, local governments must first choose to designate some of the money for a buyout program. Affected homeowners eventually receive notice and must respond if they are interested. For those who say yes to being bought out, the (next) wait begins. The offer—if there is one—typically comes through years later.

A water line indicating the height of flood waters in San Antonio, May 2013

© San Antonio Express-News/ZUMAPRESS.com/Alamy

During that time in limbo, what are you, the hypothetical homeowner, to do? Say your house needs a new hot water heater, a new roof, or another major repair. Do you make those repairs and keep up with home maintenance, knowing you might be bought out but won’t be reimbursed for the upkeep costs? And if you do make the repairs, are you still likely to want the buyout? Many state and local governments also cap the buyout price well below market value, which often convinces buyers to take the repair money and put the property right back on the market.

Let’s consider a better scenario. Imagine if owners of extremely flood-prone properties got the opportunity to break this cycle. FEMA could offer a rate reduction as an enticement for owners to agree, right now, to sell the government their home at a preflood market price immediately after the next major incident. Then, after a home is heavily damaged, FEMA would make good on the promised purchase and the family would relocate to a safer, more stable neighborhood. We’d have more certainty, less delay, and fewer families at risk over the long term.

We’d also save our government a pretty penny. Among homes that cost less than $250,000—the maximum the NFIP will insure—the federal government has already paid, on average, 22 percent more than the home’s market value in repairs. In other words, Uncle Sam would have saved tens of thousands of dollars by simply buying the house outright many years ago.

This type of preflood buyout program would not be a panacea, but it would help more people get out of harm’s way. FEMA’s insurance premiums are based on assessments of flood risk that are badly out of date. When Hurricane Sandy struck New York City in 2012, the area’s flood maps had not been significantly updated since 1983. That means many homeowners were living in vulnerable houses but not covered by NFIP insurance, and many of those who had coverage weren’t paying enough, based on their actual flood risk. (In FEMA’s defense, homeowners have repeatedly fought premium increases through their political representatives, which may contribute to the glacial pace of updating the maps.)

Climate change makes it increasingly urgent that we find a fix for our outdated flood insurance program. According to FEMA, areas with a high risk of flooding will increase by 55 percent along the East Coast and 45 percent along major rivers by 2100. Despite these risks, Americans will continue to stream to coastal and riverside areas, further heightening the value of property at risk of floods. FEMA expects the number of residents required to buy NFIP insurance along the nation’s coast to increase by as much as 130 percent by the end of the century.

The Trump administration should stop pretending that climate change doesn’t exist—that would be a major step forward. Our nation’s failure to act on this major threat is only worsening the impacts of sea-level rise and flooding. But the executive branch can’t fix all the problems with flood insurance on its own. Congress is responsible for making reforms to the laws that govern flood insurance. For starters, its members need to make sure homeowners and buyers know more about the flood risks they face today and in the future. And more federal assistance needs to go more quickly to vulnerable homeowners who want to move to higher ground, to safer homes, and into neighborhoods where they and their children won’t live in fear of the next big storm. Congress must make these reforms to the National Flood Insurance Program.

“It’s in everyone’s interest to get at-risk homeowners the assistance they need to relocate,” Moore says. “As Congress and FEMA consider proposals to fix NFIP, we’ll work to make sure this is part of the reform package.”

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