Subsidizing folly

As flooding rises, federal insurance must adjust

Put the national flood insurance program and climate change denial together, and you have a perfect storm.

The past several weeks of hurricanes have reminded us that doing nothing to halt the rising and warming of our oceans is a terrible idea.

But there is another bad idea the storms should be bringing to our collective attention: the federal flood insurance program.

Many people like living near beaches for obvious reasons. But as with most good things in life, there are trade-offs. For owning a house by the ocean, perhaps the biggest one is the risk of a home-erasing squall.

But thanks to federal flood insurance, that possibility never weighs as heavily as it should in the minds of those looking to move to or build along the coasts. Common sense tells us that far fewer people would choose to invest in flood-prone areas if the financial risk lay with only them. Thus in the decades since the legislation’s passage in 1968, the National Flood Insurance Program has driven coastal housing development in the United States well beyond its market rate of growth. And only recently have the dire consequences of the government’s intervention emerged.

The NFIP accomplished its original goal of insuring existing buildings vulnerable to floods, while incentivizing new projects to build above the floodplain.

The turning point for the NFIP came when Hurricane Katrina wrecked New Orleans and parts of the Gulf Coast, with Rita, Sandy and several other major storms following not long thereafter. The federal government, using outdated flood projections to calculate insurance rates, vastly underestimated the exploding cost of insuring Americans against storm surges. Even before Harvey and Irma, the NFIP owed $24.7 billion to the Treasury for past claims.

Climate change has permanently altered the math of flood insurance. But there has been no adjustment. The government still underwrites unreasonable risk and you still pay.

We need to put the risk of building in floodplains on the backs of builders and buyers and take it off the backs of the taxpayers.