U.S. flood in­sur­ance pro­gram strug­gling

Agency faces $25 bil­lion in debt, re­peated claims on dam­aged prop­er­ties

The Washington Post - - FRONT PAGE - BY BRADY DEN­NIS

pequannock, n.j. — Time af­ter time, as the river has risen and the wa­ter has crept up Roo­sevelt Street, Leni-anne Shuchter has fled the white clap­board home she bought more than four decades ago.

There was the night in 1984 when res­cuers plucked her from a neigh­bor’s roof as flood­wa­ters en­gulfed her house. And the months in 2011 when she and her hus­band, John Van Seters, lived in a ho­tel af­ter tor­ren­tial rains from Hur­ri­cane Irene forced them to gut walls and floors and re­place nearly every­thing they owned.

In be­tween, other storms have forced her to file claim af­ter claim with the trou­bled Na­tional Flood In­sur­ance Pro­gram so she could re­build. Yet the small home re­mains as vul­ner­a­ble as ever, a re­al­ity re­flected by its fall­ing value in re­cent years.

“If I had a choice, I would sell,” said the 65-year-old Shuchter, who dreams of re­tir­ing to Ari­zona or Ne­vada. “I don’t need to deal with this any­more. [But] the re­al­ity of sell­ing is nil.”

The cou­ple’s house is what the fed­eral gov­ern­ment de­fines as a “se­vere repet­i­tive loss prop­erty” — one of many that have been covered over and over again by tax­pay­ers, the cu­mu­la­tive pay­outs of­ten far ex­ceed­ing what the struc­tures are worth. Na­tion­wide, 11,000 such prop­er­ties dot coastal zones or other low-ly­ing ar­eas, and their num­bers con­tinue to grow, in part be­cause of the ef­fects of cli­mate change and on­go­ing de­vel­op­ment.

One house out­side Ba­ton Rouge, val­ued at $55,921, has

flooded 40 times over the years, amass­ing $428,379 in claims. A $90,000 prop­erty near the Mis­sis­sippi River north of St. Louis has flooded 34 times, rack­ing up claims of more than $608,000. And an oft-flooded Hous­ton home has re­ceived more than $1 mil­lion in pay­outs — nearly 15 times its as­sessed value of $72,400. The data is col­lected by the Fed­eral Emer­gency Man­age­ment Agency, which over­sees the in­sur­ance pro­gram.

The ex­treme cases are only a frac­tion of the NFIP’s 5 mil­lion ac­tive poli­cies, but they his­tor­i­cally have ac­counted for about 30 per­cent of its claims. And while they’re a fi­nan­cial al­ba­tross for tax­pay­ers, the claims are hardly the pro­gram’s only chal­lenge.

The NFIP, which must be reau­tho­rized by the end of Septem­ber, is nearly $25 bil­lion in the red — a debt that ad­min­is­tra­tor Roy Wright says he sees no way to pay back.

“Only Congress can deal with that past loss,” Wright said last week. “What we’re fo­cused on to­day is en­sur­ing that go­ing for­ward, we’re putting our­selves on a sound fi­nan­cial foot­ing.”

On Capi­tol Hill, law­mak­ers are scram­bling to over­haul the half­cen­tury-old pro­gram. Al­low­ing it to lapse Sept. 30 would risk dis­rupt­ing the buy­ing and sell­ing of homes in flood-prone ar­eas across the coun­try.

The NFIP has long en­joyed bi­par­ti­san sup­port, if for one sim­ple rea­son. “Where it rains, it can flood, so no one in the coun­try is in­su­lated,” said Laura Light­body, who di­rects an ini­tia­tive at the Pew Char­i­ta­ble Trusts aimed at help­ing com­mu­ni­ties bet­ter pre­pare for flood risks. “It touches all 50 states.”

But not equally. Data shows that some of the worst flood­ing, and of­ten the most fre­quent, has oc­curred along the Gulf Coast of Louisiana and Texas. Houses along the Mis­sis­sippi River have re­peat­edly been del­uged. And the At­lantic coast from Mi­ami to Bos­ton faces per­pet­ual — and es­ca­lat­ing — threats. Although there are cer­tainly beach­front man­sions af­fected, many homes be­long to work­ing-class Amer­i­cans.

Crit­ics have long main­tained that although the NFIP was in­tended to en­cour­age smarter de­vel­op­ment, its cur­rent de­sign too of­ten bails out peo­ple in flood-prone ar­eas. In short, it in­cen­tivizes stay­ing put, what­ever the cost, rather than mov­ing to higher ground. Plus it has had only lim­ited suc­cess in dis­cour­ag­ing de­vel­op­ment in ques­tion­able ar­eas.

Fig­ur­ing out how to tackle the pro­gram’s prob­lems re­mains com­pli­cated and po­lit­i­cally fraught. Law­mak­ers must de­cide whether to raise rates — and by how much — on the roughly one in five home­own­ers who pay be­low-mar­ket pre­mi­ums man­dated by Congress. Mak­ing the home­own­ers pay rates that re­flect their true flood risk could shore up the pro­gram’s fi­nances; it also could mean sharp pre­mium hikes and a public back­lash over af­ford­abil­ity.

The same dilemma is part of the rea­son Congress re­treated from its last ma­jor ef­fort to fix things five years ago, when a sud­den rise in rates caused an out­cry in some com­mu­ni­ties.

“No con­gress­man ever got un­elected by pro­vid­ing cheap flood in­sur­ance,” said Rob Moore, a se­nior pol­icy an­a­lyst at the Nat­u­ral Re­sources De­fense Coun­cil and an ex­pert on the pro­gram.

Some on Capi­tol Hill are push­ing for more pri­vate firms to en­ter the flood in­sur­ance mar­ket — an idea Wright, the ad­min­is­tra­tor, said he sup­ports — although crit­ics worry that com­pa­nies could cherry-pick the least trou­bled prop­er­ties, leaving the gov­ern­ment on the hook for the other ad­dresses.

No mat­ter who the un­der­writer is, Congress must deal with the thorny ques­tion of how best to fund the con­tin­ued up­dat­ing of de­tailed U.S. flood maps. Many are woe­fully out­dated and do not re­flect changed flood risks — not to men­tion fu­ture risks from fac­tors such as ris­ing seas. The Trump ad­min­is­tra­tion has ac­tu­ally pro­posed cut­ting $190 mil­lion an­nu­ally from the map­ping work.

Flood­ing re­mains the most common and most costly form of nat­u­ral dis­as­ter in the United States, and in­sur­ance to pro­tect against it has be­come in­creas­ingly nec­es­sary in cer­tain places. A report this month from the Union of Con­cerned Sci­en­tists sug­gests an omi­nous fu­ture. Within the next two decades, it fore­casts that nearly 170 U.S. coastal com­mu­ni­ties will face chronic inun­da­tion, de­fined as flood­ing at least 26 times a year. That’s al­most twice as many at-risk lo­ca­tions as to­day.

Congress cre­ated the flood in­sur­ance pro­gram in 1968 be­cause the costs of dis­as­ter as­sis­tance were es­ca­lat­ing and pri­vate in­sur­ers had largely aban­doned the mar­ket. The pro­gram not only re­quires peo­ple pur­chas­ing homes in flood­plains to take out in­sur­ance as a con­di­tion of get­ting a mortgage, but it also pro­vides grants to help mit­i­gate vul­ner­a­ble prop­er­ties, ei­ther by el­e­vat­ing them or in some cases buy­ing out home­own­ers and tear­ing their struc­tures down.

But the lat­ter isn’t hap­pen­ing of­ten enough, ac­cord­ing to the NRDC’s Moore.

“It’s help­ing peo­ple stay in places that we know are un­wise to stay in,” he said. “The days of flood-re­build-re­peat need to come to an end. We need to do things dif­fer­ently to get out of that cy­cle.”

The fi­nan­cial woes be­gan when Hur­ri­cane Ka­t­rina dev­as­tated the Gulf Coast in 2005, fol­lowed by hur­ri­canes Rita and Wilma. The pro­gram paid eight times as many claims that year as in any pre­vi­ous year — and ended up bor­row­ing $17.5 bil­lion from the U. S. trea­sury.

Hur­ri­cane Sandy in 2012 re­sulted in 144,000 more claims and an­other $6.25 bil­lion in debt, as well as al­le­ga­tions that thou­sands of home­own­ers were wrong­fully de­nied pay­outs by com­pa­nies ad­min­is­ter­ing flood in­sur­ance on FEMA’s be­half.

Even in 2016, when there was no sin­gu­larly cat­a­strophic event, floods in Louisiana, Texas and other states re­sulted in the third-largest year of pay­outs in the pro­gram’s his­tory.

In a report this spring, the Gov­ern­ment Ac­count­abil­ity Of­fice de­tailed the NFIP’s fun­da­men­tal dilemma, say­ing it “has ex­pe­ri­enced sig­nif­i­cant chal­lenges be­cause FEMA is tasked with pur­su­ing com­pet­ing pro­gram­matic goals — keep­ing flood in­sur­ance af­ford­able while keep­ing the pro­gram fis­cally sol­vent.”

For all its trou­bles, law­mak­ers know that the pro­gram af­fects the lives of mil­lions of Amer­i­cans and that fail­ing to reau­tho­rize it this fall could cause ma­jor up­heaval for home­own­ers and the real es­tate mar­ket.

“Flood dis­as­ters to­day would be truly grim but for NFIP,” said Ni­cholas Pin­ter, a ge­ol­ogy pro­fes­sor at the Univer­sity of Cal­i­for­nia at Davis and an ex­pert in flood risks. He added: “It def­i­nitely has prob­lems. . . . It needs im­prov­ing. But it’s a hell of a lot bet­ter than it was when there was noth­ing.”

A House com­mit­tee last month passed leg­is­la­tion to over­haul and reau­tho­rize the pro­gram. If adopted, it would com­pel com­mu­ni­ties with per­sis­tent flood­ing prob­lems to de­velop plans to re­duce them and would re­quire more trans­parency about a prop­erty’s flood his­tory.

“The American tax­payer [has] been called upon in the past to bail out a pro­gram that is cur­rently drown­ing,” the com­mit­tee’s chair­man, Rep. Jeb Hen­sar­ling (R-Tex.), said this spring as law­mak­ers weighed vary­ing pro­pos­als. And although home­own­ers need to be pro­tected from “sticker shock . . . the pro­gram must be made sus­tain­able.”

The Se­nate also is try­ing to strengthen the NFIP, with mea­sures pro­posed to bet­ter fund flood mit­i­ga­tion projects, promote the use of high-res­o­lu­tion map­ping tech­nol­ogy and en­cour­age pri­vate in­sur­ers to en­ter the mar­ket.

Back on Roo­sevelt Street in Pequannock, a stone’s throw from the Pomp­ton River, Shuchter and her hus­band have all but re­lin­quished their dream of re­tir­ing and mov­ing, at least for now.

With help from lo­cal of­fi­cials, the cou­ple are se­cur­ing a FEMA grant that would raise their 960square-foot house eight to 10 feet off the ground. The project could be­gin late this year and cost an es­ti­mated $196,000 — $10,000 more than their prop­erty’s as­sessed value.

The work will mean up to six more months liv­ing in a ho­tel. They will re­turn to a home hov­er­ing high above its pre­vi­ous site, and stairs Shuchter wor­ries will grow only more daunt­ing as they age.

In the mean­time, Shuchter keeps im­por­tant pa­pers — birth cer­tifi­cates, wills, past flood records — in a wa­ter­proof box in the bed­room. She has made dig­i­tal copies of fam­ily pic­tures. She also has a list of what to quickly grab when the next evac­u­a­tion call comes, every­thing from med­i­ca­tions to lap­tops.

She also has book­marked a Na­tional Weather Ser­vice web­site that mon­i­tors the flood gauge on the river. On nights when rain is pound­ing or a storm is swirling, she of­ten stays up late, check­ing the site to make sure the wa­ter hasn’t risen to per­ilous lev­els. But ex­pe­ri­ence tells her it’s only a mat­ter of time.

“I do be­lieve it’s when,” she said. “Not if.”

PHO­TOS BY BRYAN ANSELM FOR THE WASHINGTON POST

TOP: The home of John Van Seters and Leni-anne Shuchter of Pequannock, N.J., has been flooded re­peat­edly over the years. They’ve filed claims each time with the be­lea­guered Na­tional Flood In­sur­ance Pro­gram.

BOT­TOM: The home, right, was al­most com­pletely gut­ted af­ter Irene. Now, rather than re­lo­cate, the cou­ple will use a fed­eral grant to raise their house 10 feet off the ground — a project es­ti­mated to cost $10,000 more than their prop­erty’s as­sessed value.

MID­DLE: Shuchter looks at pho­tos of the dev­as­tat­ing wa­ter dam­age her home suf­fered in 2011 be­cause of Hur­ri­cane Irene.

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