Harvey proves folly of federal flood insurance

Hurricane Harvey offers the clearest lesson why Congress should not perpetuate the federal National Flood Insurance Program (NFIP), which expires at the end of this month. The ravages in Houston and elsewhere would be far less if the federal government had not offered massively subsidized flood insurance in high-risk, environmentally perilous locales. But this is the same folly that the feds have perpetuated for almost 50 years.

The NFIP has embraced a “flood-rebuild-repeat” model that has spawned an almost $25 billion debt. A recent Pew Charitable Trust study revealed that 1% of the 5 million properties insured have produced almost a third of the damage claims and half the debt.

The program paid to rebuild one Houston home 16 times in 18 years, spending almost a million dollars to perpetually restore a house worth less than $120,000. Harris County, which includes Houston, has almost 10,000 properties that have filed repetitive flood claims.

One of the program’s purported goals was to deter development in fragile areas such as coastal wetlands. But as Steve Ellis of Taxpayers for Common Sense observed, “NFIP helped fuel the coastal development boom that increased the program’s risk exposure and losses.” Its anti-environmental impact has been denounced by organizations ranging from the Sierra Club to the Coastal Alliance.

The subsidies help level the playing field between swampland and solid ground. For instance, Houston residents outside a too narrowly drawn floodplain can receive $350,000 in insurance coverage for only $450 a year.

Controversies spurred Congress to radically reform flood insurance five years ago, ending some of its worst abuses. But prudence proved unbearable on Capitol Hill. After homeowners wailed about higher insurance rates, Congress gutted most of the reforms two years later to prevent the program from charging fees to accurately reflect perils. Politicians insisted that the repeal was necessary to preserve “affordable” flood insurance. But nobody was conscripted to buy a vacation home in Hurricane Alley on the Atlantic Coast.

Rep. Jeb Hensarling, R-Texas, chairman of the House Financial Services Committee, is pushing a bill that would curtail some subsidies and allow more competition from private insurers. A competing bill championed by Sen. Cory Booker, D-N.J., and Sen. Marco Rubio, R-Fla., would perpetuate perverse incentives and, as The (Newark) Star-Ledger warned, would be “almost certain to encourage more building in repeatedly flooded areas.”

Some Democrats have pushed to “forgive” NFIP’s debt. But the Government Accountability Office and the Congressional Budget Office concluded that NFIP will continue to be unsustainable even if past losses are expunged.

There is no constitutional right to federal bailouts for flooded homes. The sooner the feds exit the flood insurance business, the safer American coasts and paychecks will be.

James Bovard, author of Public Policy Hooligan, is on USA TODAY’s Board of Contributors.