As taxpayer subsidies for the national flood-insurance program began winding down this year, coastal property owners began to complain about bigger insurance bills. With rates rising to reflect the true risk of living in flood-prone areas, some people’s annual premiums rose to several thousand dollars, from a few hundred.
Just as inevitably, then, Congress sprang to the rescue.
Last week’s Senate vote to delay changes meant to bolster the $1.3 trillion flood-insurance program was no surprise. If the House goes along, however, it will only assure that the program, already $24 billion in debt, will have to reach deeper into taxpayers’ pockets.
There are better ways to wean coastal homeowners from a subsidy that undermines sensible policy meant to prevent private losses from floods becoming a burden on the public.
Two years ago, Congress seemed determined to turn things around, passing reforms that, over a five-year period, would have phased out subsidized insurance premiums, eliminated the subsidy for vacation homes upon resale, barred eligibility for those who allowed coverage to lapse and adjusted flood-zone maps to reflect rising sea levels. Because of the gradual phase-in, the reforms assured that only 5 percent of policyholders would be subject to annual premium increases of more than 25 percent.
These subsidies go to properties that have suffered serious damage in past floods or are in flood plains — many of which are shoreline vacation homes. Although only about 20 percent of the roughly 5 million properties in the flood-insurance program receive the subsidy, the combined value of those that do ($527 billion) amounts to half the total value of all properties covered.
The subsidies have always been, at best, a well-intentioned mistake. Designed in the 1960s to reduce federal spending on disaster aid, the flood-insurance program quickly became a boondoggle that encouraged development on vulnerable beachfronts and sensitive wetlands prone to flooding. It is no surprise that some of the biggest opponents of flood-insurance subsidies, along with fiscal conservatives, are environmentalists.