The damage caused by record-breaking flooding in Houston, Texas, this week may have been exacerbated by Washington, D.C.’s approach to flood insurance.
When Congress returns to Washington in September, lawmakers will likely move to approve more funding for the Federal Emergency Management Agency (FEMA) to deal with the damage, and it may need to bail out a flood insurance program in order to pay out claims for damaged Houston houses.
The National Flood Insurance Program, started in 1968 and has more than $24 billion of debt as of March, incentivizes residential building and rebuilding in flood-prone areas by subsidizing disaster insurance.
Some homes have been restored with federal flood insurance multiple times after devastating storms, according to one study. The 1998 Higher Ground report published by the National Wildlife Federation found that one Houston home covered by NFIP had been flooded 16 times in 18 years, costing a total of $800,000 in repairs for a home valued at $115,000.
The Higher Ground report found that prior to 1996, 2 percent of houses covered by NFIP repeatedly claimed insurance money, those homes were responsible for 40 percent of the insurance payouts.
The NFIP is unsustainable, according to an April Government Accountability Office report, because it has incompatible program goals: “keeping flood insurance affordable while keeping the program fiscally solvent.” NFIP borrowed $1.6 billion to pay claims in 2016, and the program is unlikely to recoup its costs.
The ratio of repetitive-loss homes covered by NFIP has improved somewhat, and now makes up 1 percent of all homes in the program and accounts for 25 percent of the payouts, according to a 2016 Pew Charitable Trusts study. However, “repeatedly flooded properties have cost the NFIP more than $12.5 billion — equivalent to roughly half of the program’s $23 billion debt,” the report said.
The program’s debt has increased over the years, prompting Congress to raise the amount the program is allowed to borrow and occasionally provide a large bailout of the program.
“It’s basically lather, rinse, repeat,” Steve Ellis, vice president of Taxpayers for Common Sense, told Politico. “The fundamental responsibility of government is to protect people, but this program keeps encouraging people to build in harm’s way.”
One House Republican, Texas Rep. Jeb Hensarling, has been calling attention to the failures of the NFIP for years.
“I hope the devastation caused by Hurricane Harvey is a wakeup call to Washington when it comes to flood insurance,” Hensarling told The Daily Caller News Foundation in a statement.
“We are faced with the likelihood that there is not enough money in the program to pay these claims so the NFIP will have to rely on Congress for another taxpayer-funded bailout,” Hensarling said.
Hensarling, chairman of the House Committee on Financial Services, has proposed a bill to stabilize NFIP by opening it up to market competition. “In the small portion of the market that is currently open to private competition, people have seen their rates come down,” Hensarling said.
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