How The New Flood Insurance Reforms Make Costly Future Climate Disasters More Likely

CREDIT: flickr/clickerjac

On Friday, President Obama signed into law the Homeowner Flood Insurance Affordability Act, very aptly named as it helps homeowners living in flood zones afford their insurance rates. The only problem is that some homeowners just shouldn’t be living in flood zones, and their rising insurance rates were meant to reflect that. This is especially true in coastal flooding zones where rising sea levels due to climate change, extreme weather events and human-induced erosion and environmental degradation can make the risks outweigh the benefits, and the costs — for which taxpayers are liable — exceedingly high.

The bill comes two years after other recent reforms made to the National Flood Insurance Program (NFIP) which is overseen by FEMA. The 2012 bipartisan Biggert-Waters Flood Insurance Reform Act was designed to make the NFIP more financially stable in part by phasing out long-instituted subsidies for high-risk coastal properties. Starting with Hurricane Katrina in 2005 and building up to Hurricane Sandy, which came a few months after the reforms, NFIP found itself completely fiscally insolvent, exhausting the premium-funded resources of FEMA and requiring around $28 billion in taxpayer-funded bailouts. After coastal property owners rose up to protest the increased insurance rates for living in a flood zone, with its latest action Congress has now bowed to short-term constituent demand rather than doubling down on confronting the long-term risks and costs of living in flood zones.

Part of the what the 2012 bill did to more accurately reflect risk was scale back subsidies for properties experiencing multiple or extremely severe floods. It also phased out subsidies for vacation homes and properties receiving grandfathered-in rates that no longer reflect their flood risk.

“Rolling back the earlier Biggert-Waters reforms and reinstating insurance subsidies is bad public policy,” wrote Rob Moore, Senior Policy Analyst for the Natural Resource Defense Council. “It sets back efforts to prepare for the impacts of climate change and is an over-correction for legitimate concerns about the affordability of flood insurance for people of limited means.”

Moore points out that only about a fifth of the properties, or around 1.2 million, covered under the NFIP are subsidized. The other 4.3 million homeowners already pay risk-based subsidies. “The recent actions by Congress benefits the small minority of property owners and makes it easier and cheaper to buy properties in the riskiest, most flood prone areas,” writes Moore.

Those 1.2 million people include folks like Lurie and Michael Portanova, lifelong residents of Jersey Shore, Pennsylvania. The Associated Press reported that their annual flood insurance on two buildings they bought in 2012 on banks of the Susquehanna River went from less than $3,000 to a minimum of $26,868. The recent Congressional reforms bring the rate back down to what it was, but allow it to continue to rise at nearly 20 percent a year toward that original risk assessment cost.

“There’s no way we can afford that. Just no way,” Michael Portanova told the AP. “We’d have to let it go back to the bank and walk away from it.”


CREDIT: “Moving Out of Harm’s Way”

While many coastal properties belong to wealthy landowners and are overseen by profit-driven real estate firms looking to cash in on high values, there is a significant inequality issue that can be hard to fairly address in broad-reaching reforms. However, in the long-term the considerations change, especially in areas heavily prone to the impacts of sea level rise and potentially stronger and more devastating hurricanes that are bolstered by warmer ocean temperatures.

“This is an equality issue in the short term, but a moral issue in the long term,” said Shiva Polefka, an ocean policy researcher at the Center For American Progress, and author of an extensive report on coastal flooding called “Moving Out Of Harm’s Way”. “Keeping low rates for people in the crosshairs of climate change is hazardous, as the next devastating disaster could strike at anytime.”

There could have been ways to keep the helpful 2012 reforms of the Biggert-Waters Act while addressing the issues of inequality. For instance by issuing means-tested vouchers for low- and middle-income residents who couldn’t afford flood-insurance coverage at risk-based premiums, as noted in a 2013 issue brief from Resources for the Future and the Wharton Risk Management Center.

Even so, with so much personal and cultural attachment to many flood-prone residences that may go back generations and the issue already being in political crosshairs, flood reform may end up coming in more ugly, ad hoc and chaotic spurts as events such as Superstorm Sandy get more expensive and harder to justify paying for. Sandy cost more than $68 billion and caused the deaths of 117 Americans. With sea-level rise of several feet expected by the end of the century, storm surges like that caused by Sandy will become more likely, and more costly.

“For advocates of sustainable development, Biggert-Waters held out the hope that the longstanding promise of the NFIP — controls over rampant real estate development in hazardous terrains — could at last be realized,” wrote Scott Gabriel Knowles, an associate professor of history at Drexel University and author of The Disaster Experts: Mastering Risk in Modern America, in an op-ed for Slate. “Intense lobbying by homebuilders at the state level has a long history of thwarting local zoning restrictions:”

“And many governors and local officials were eager to hand out relief checks and spur a return to the shore after a flood rather than waiting for impact studies that might restrict post-disaster reconstruction. The weakened act is much less likely to slow down coastal development in flood zones, and that’s bad news for advocates of an aggressive climate change policy.

Floods are already the number one natural disaster in the United States, with the NFIP paying more than $7.7 billion in flood insurance claims to all policyholders in 2012. A report from last year from consulting firm AECOM found that sea-level rise could increase the flood-hazard area in the country’s coastal floodplain by 55 percent by 2100. In the meantime, coastal populations continue to swell, having expanded nearly 40 percent since 1970 — with about 40 percent of the U.S. population living in a county with coastline.

Not only does this put more people in harm’s way, but it endangers sensitive ecological areas that play an important role in maintaining biodiversity and buffering against coastal erosion and devastation from storms.

“What we need to be doing is physically adapting the coastline to sea level rise,” said Polefka. “American coastal communities are perched on the tracks, and sea level rise is this freight train heading towards them. When we rolled back the recent flood insurance reforms, we’re basically telling people they don’t need to get out of the way.”