There was a rally yesterday in Montpelier (Mitchell Family Paywall Alert) — one of ten around the country — drawing attention to massive hikes in flood insurance premiums for many Americans living in flood-prone areas, as defined by our good friends at FEMA. The local rally was organized by one Chris Winters of Berlin, who owns a home near the Dog River, and who faces a sticker-shock-inducing $8,000-per-year flood insurance premium.
The cause: The Biggert-Waters Act of 2012, which reformed the federal flood insurance subsidy program.
And while I sympathize with Winters, I have to say that the feds’ flood insurance program was sorely in need of reform. In effect, We The People have been subsidizing the cost of flood insurance for a whole lot of folks with expensive lakefront or beachfront real estate. Not to mention encouraging unwise development of flood-prone lands.
Winters is a sympathetic figure in all of this; he doesn’t have deep pockets and would have great difficulty paying the premiums. As it happens, his home did not flood during Tropical Storm Irene; but when FEMA updated its flood-zone maps, his home was listed in the danger zone.
From his point of view, Biggert-Waters is “trying to balance the budget for FEMA, and they’re doing it on the backs of the policyholders.” I’d put it another way: Biggert-Waters was an attempt to eliminate one of the biggest boondoggles in the system, and make policyholders pay the true cost of insuring their properties.
There’s room for some creative thinking on ways to ease the burden on people like Winters (some sort of means test?), but I’d hate to see Biggert-Waters completely undermined. I’d especially hate for shorefront developers to latch onto cases like Winters’ in an effort to roll back the reform.
As for Vermont’s Congressional delegation, they’d like to see a postponement in the new insurance requirements until an affordability study (called for in Biggert-Waters) can be completed.
Nothing wrong with that. But the problem with the notion of “affordability” is that previous federal policy made a lot of flood-prone real estate artificially affordable, and Biggert-Waters seeks to correct that. Generally speaking, I hope it stands.
I urge you to look more closely at the problem. I agree with you that we do need reforms to the National Flood Insurance Program (NFIP) which is running a huge deficit. Most who participated in this rally and protest agree. But if we go about it as proposed, we will all pay dearly.
Many people have visions of multimillion dollar vacation homes rebuilt again and again on oceanfront property when they look at this issue. I get as miffed as the next guy that we, as a country, provide relief funds to rebuild flood damaged structures like that over and over again. But this Biggert-Waters Act did not anticipate its much bigger impact on the struggling middle class families and small businesses further inland from the ocean and along our river valleys.
We need more accountability and reforms to how the NFIP operates before we hand over a blank check and allow them to set their own fees to cover their costs. FEMA can’t account for their administration costs, how they calculate this “actual risk” is a mystery, and the maps are often based on flawed data. Our $8,000 bill and a dry home during Irene is only one example. We’ve never been flooded, never made a FEMA claim, and bought our home in 2010 under the assumption that we did not need flood insurance. I don’t mind having to get flood insurance. I expect that living next to a river. But $8k!?!? Something does not add up.
It is easy to say that we ought to end these NFIP “subsidies,” but that’s easier said than done. Much like national health insurance, if you make flood insurance unattainable (***cough*** eight grand a year ***cough***), then you force people out of the program. We will sell our home or walk away from our mortgage. If we sell, it will probably be to a cash buyer who will not have to have flood insurance. Again, less people in the pool and fewer people to spread the cost. The new rates will drive people from the program, including those people without mortgages who do not have to have flood insurance but do because it’s the smart thing to do. As people flee the program, it will go into a death spiral.
The NFIP ran surpluses until Katrina. Those surpluses were swept out to pay for other things. Additionally, some 30% of FEMA payouts go to uninsured homes. Our neighbors had some water in their basement and received a check for the damage. They live up on a hill, out of flood zone and have never paid for flood insurance. That could change as an initial reform step, and we could be more aggressive about proactive mitigation in flood zones such as culverts, berms, buyouts, and restricting new construction or repairs, but that would require some foresight and a long-view approach. We also need to seriously think about whether we, as a nation, are willing to tell disaster victims that they are on their own, or at least are not going to see help from their government.
But this approach – authorizing FEMA to charge “actual risk” rates — is what you had before the NFIP, when insurers charged outrageous rates and millions of people were unable to get flood insurance. It wasn’t even offered in some markets.
Last but certainly not least, these steep increases will cause economic damage for everyone. It throws uncertainty into the housing market, takes away discretionary income, and destroys property values. Our home is (was) valued at around $300k. We owe $200k on our mortgage. With a new flood map and new law, we estimate our property value has dropped $60-$80k overnight. If all of those flood plain properties are devalued, the rest of the community has to pick up the tax tab.
I’m no expert on flood risks or insurance. I’m just a bewildered guy with an $8K insurance bill due this month and every year after that. I have a mortgage, two car payments, and I’m still paying off my student loans, not to mention a couple kids soon to go off to college. I feel like I’ve had my pocket picked, with very little notice and no good explanation. So we will continue to fight this and will continue to warn others that this is coming and it’s an inustice. The scary part is that most people won’t know what hit them until the bills come due or they try to sell their homes. If you know anyone in a flood zone (there are thousands of us across the state) please let them know about this and have them look into how much their rates will be increasing if they have insurance, or how much they will be for a new buyer if they sell their home.
Rep. Maxine Waters (namesake of the bill), and dozens of other lawmakers are calling for delay due to the unintended consequences and unexpectedly high rates. Vermont’s congressional delegation agrees. She, and they, say this is not what they intended.
http://www.stopfemanow.com/sta…
Anyone interested in learning more can go to the flood insurance forum I set up on facebook https://www.facebook.com/vermo…
or go to http://www.stopfemanow.com/ for more info on what is happening nationally. These are not whiny rich folks, these are regular families devastated by the impact of this poorly thought out law, and their stories are heartbreaking.
Sorry for the length of this post, but this one is personal. I didn’t even get into the related issues of climate change, campaign finance reform, austerity measures, government waste and other less noble subsidies than those to keep flood insurance affordable.
I am a big fan of GMD, but not the least bit happy to be the subject here.
Dude, that’s a laissez faire meme if ever there was one.
1. One could say alternative energy sources are “artificially affordable” due to subsidies. Or weatherization. Or food for food stamp recipients, or anything that the government engages in that would otherwise be unreachable for poor (or even middle class) people if we chain our concept of affordability exclusively to how it would be defined by an unregulated market.
“Affordability” of the costs to live and keep a home is defined by a synergy of public and private contexts. That perspective is what distinguishes liberals from conservatives. This is no different.
2. It is dangerous – even elitist – not to recognize the impact on economically disadvantaged people of sudden changes to the often tenuous budgetary calculus they have to make just to get by. This is another thing lefties so often overlook. If you’re balancing the basic needs on a budgetary edge all the time, it doesn’t matter that the new expense thrust upon you is reasonable on paper – it still is capable of pushing over the brink. Again, the fact that we care about that – that in fact, it is the most important thing TO care about when crafting public policy – is what distinguishes us from the right.
Public subsidies that keep families from losing their homes is hardly a boondoggle. It’s a conservative construction that all government expenditures should amount to break-even investments, at worst. If the system needs to be “reformed” in this way, it should happen gradually, and in such a way that people do not have to abandon their homes. Yeah it sucks that people live on flood prone areas, but the fact is that.. well…. people live on flood prone areas. If we want to get them out of there, lets work with them, not essentially tax them regressively into homelessness.