Since They “Built Where the Government Told Them,” They Demand Government Flood Insurance Subsidies Be Restored

Congress may be about to repent its
uncharacteristic act of fiscal rectitude and environmental
protection by rolling back its flood insurance reforms from 2012.
Prior to the reforms, government flood insurance program subsidies
over the decades had encouraged lots of people to live, work, and
build in flood-prone areas. Why not? It’s really nice to live along
the banks of a river or enjoy a sunset from the balcony of your
oceanfront McMansion. And if a hurricane or flood knocks it down,
cheap government insurance will pay for the rebuilding.

Eventually recognizing that the flood insurance program was a
fiscal disaster and an environmental menace, Congress passed the
Biggert-Waters Flood Insurance Reform Act. Yesterday, the
New York Times reported:

The Biggert-Waters measure sought to reform the nation’s nearly
bankrupt flood insurance program, ending federal subsidies for
insuring buildings in flood-prone coastal areas. Over the past
decade, the cost to taxpayers of insuring those properties has
soared, as payouts for damage from Hurricanes Katrina, Irene, Isaac
and Sandy sent the program $24 billion into debt.

The aim of the measure was to shift the financial risk of
insuring flood-prone properties from taxpayers to the private
market. Homeowners, rather than taxpayers, would shoulder the true
cost of building in flood zones.

Deficit hawks liked the idea because it would curb a rapidly
rising source of government spending. Environmentalists liked the
bill because they said it would reflect the true cost of climate
change, which scientists say is ushering in an era of rising sea
levels and more damaging extreme weather, including more
flooding.

Well, that was last year. It turns out there was a reason why
private insurance was not offering flood insurance to lots of the
folks who were taking advantage of the government subsidized
policies. The risks were too high for the premiums being paid. Who
knew? From the Times:

But a year after the law passed, coastal homeowners received new
flood insurance bills that were two, three, even 10 times higher
than before.

In Beach Haven West, N.J., for example, Diane Mazzuca, a
furniture showroom designer, had been paying $595 annually for
flood insurance on her $90,000 home. After Biggert-Waters ended
federal flood insurance subsidies last June, she got an updated
bill — for $4,492….

Ms. Mazzuca has plenty of company. The insurance rate increases
hit many of the 5.5 million coastal home and business owners
covered under the National Flood Insurance Program, and came as the
Federal Emergency Management Agency, which runs the program, was
updating flood maps and placing thousands of homes inside flood
zones for the first time. Last summer and fall, homeowners near
coasts, rivers and wetlands saw their insurance rates soar and
their property values plummet.

The homeowners’ frustration erupted into a grass-roots lobbying
campaign to roll back the Biggert-Waters act, and lawmakers in
Washington quickly got the message.

For example, the pro-rollback interest group, the New
Orleans-based
Coalition for Sustainable Flood Insurance issued a press
release arguing: 

To be clear, if Biggert-Waters 2012 goes forward unabated,
hundreds of thousands, and perhaps millions, of Americans who have
played by the rules, built where the government told
them (emphasis added), maintained insurance, and never
flooded will lose everything.

And so it appears that bipartisan majorities in the Senate and
the House will be voting for the Homeowner Flood Insurance
Affordabiiity Act. Did you catch that the National Flood Insurance
Program is right now $24 billion overdrawn?

For more background, check out John Stossel’s classic 2004
Reason article “Confessions
of a Welfare Queen” in which the architect for his new
oceanfront house tells him not to worry:

In 1980 I built a wonderful beach house. Four bedrooms — every
room with a view of the Atlantic Ocean.

It was an absurd place to build, right on the edge of the ocean.
All that stood between my house and ruin was a hundred feet of
sand. My father told me: “Don’t do it; it’s too risky. No one
should build so close to an ocean.”

But I built anyway.

Why? As my eager-for-the-business architect said, “Why not? If
the ocean destroys your house, the government will pay for a new
one.”

What? Why would the government do that? Why would it encourage
people to build in such risky places? That would be insane.

Recall that one good definition of insanity is doing the same
thing over and over yet expecting to get a different result. Sounds
a lot like the normal operations of Congress.

Disclosure: I have bought flood insurance from FEMA for my
cabin for the past 18 years.