Reforming federal flood insurance

NICK EICHER, HOST: It’s Thursday, April 11th, 2019. Glad to have you along for today’s edition of The World and Everything in It. Good morning, I’m Nick Eicher.

MARY REICHARD, HOST: And I’m Mary Reichard. First up: reforming the federal flood insurance program.

According to FEMA, the Federal Emergency Management Agency, floods are the nation’s most common, most costly natural disaster.

One reason for that is because the federal government subsidizes flood insurance, and that artificially lowers the cost of living in flood-prone areas.

EICHER: The National Flood Insurance Program regularly pays out more than it collects in premiums. We will refer to the program as NFIP.

Last year alone, NFIP finished $6 billion in the red. And that’s just a year after Congress forgave $16 billion NFIP owed the U.S. treasury.

Lawmakers have struggled for years to reform the program. But now the Trump administration is working to reduce NFIP’s dependence on taxpayer bailouts.

WORLD Radio’s Leigh Jones has our story.

CISNEROS: [sound of tape ripping] So this is the project we’ve been dealing with for almost two years, since the floods from Hurricane Harvey.

LEIGH JONES, REPORTER: Victor Cisneros watches as two workmen prepare to hang tile in his kitchen and living room. His voice echoes off bare walls and concrete floors

CISNEROS: We’ve definitely come a long way. We’ve had to make some drastic changes to the home.

In August 2017, Hurricane Harvey flooded the Cisneroses’ home in Pearland, just south of Houston. The cost to make repairs totaled more than half the home’s value. And that meant the repaired structure had to meet current elevation requirements.

CISNEROS: We were forced to raise the home 18 inches above the curbline.

Two feet doesn’t sound like a lot. But when it involves a 2,000 square foot house sitting on a concrete slab, it’s a lot of work.

CISNEROS: They put 78 piers below the concrete at 25 feet deep. That’s before we actually hit bedrock, or hard clay. And we have about 50 truck loads of select-fill dirt under the house, to fill that void.

From the street, it’s hard to tell much of a difference. But Cisneros hopes those two feet will keep the house from flooding again. And equally important, they will drastically lower his flood insurance rate.

At least, that’s what his insurance agent told him when he started the rebuilding process. But under new changes announced last month by the Federal Emergency Management Agency, that rate is likely to change.

FEMA currently bases flood insurance rates on whether a home is inside or outside the 100-year flood plain. Under an initiative dubbed Risk Rating 2.0, the agency will use private sector data to assess flood risk property-by-property. Houses more likely to flood will pay more, while those with less risk will get a break.

PAULISON: I think we’re recognizing as a country, that what we we’ve been doing in the past simply does not work.

That’s R. David Paulison. He served as FEMA director under President George W. Bush. He has long advocated for reforming the National Flood Insurance Program. And he says the attempt to make the rates better reflect actual risk is a good start.

PAULISON: You know, a private insurance company would not continue to insure a piece of property and lose money continually—would not do that.

Tying flood insurance rates to actual risk should help bring in more money to cover claim payouts. But it won’t address what Paulison calls the NFIP’s biggest problem: repetitive loss.

PAULISON: You know, we should say, we’re going to rebuild this house one time, and when we do rebuild it, it’s going to have to meet these new flood elevations or we’re not going to continue to do that. That takes a lot of political will. I call it intestinal fortitude. But we have to take a stand somewhere that we can’t just keep doing this over and over again.

Congress must reauthorize the NFIP before the end of next month. Properties that flood continually top the list of issues lawmakers want to address.

Republican Congressman Sean Duffy of Wisconsin noted how much those properties cost the program and taxpayers.

DUFFY: They are 2 percent of the properties, but they account for 24 percent of the cost. Two percent of the properties account for 24 percent of the cost! We’ve got to address that.

The House Committee on Financial Services held a hearing last month to gather input on proposed reform legislation. The reauthorization bills would increase spending on floodplain mapping and management, as well as mitigation efforts. And lawmakers want to forgive the NFIP’s remaining $20 billion in debt.

Reformers like Duffy insist privatization is key to making the program solvent. But that would almost certainly mean high-risk properties would see steep rate increases, while some might not get coverage at all.

That’s tripped up previous reform efforts and is one reason lawmakers have resorted to passing 10 short-term extensions for the program since 2017. But David Paulison thinks this time might be different.

PAULISON: Well, you know, I’m an optimist. I always hope, but I do see a lot of interest when you talk to people in Congress and there is a lot of head-nodding that, yes, you know, we have to do something differently.

Even if Congress kicks the reform can down the road again, the proposed rate changes will move forward. FEMA plans to announce the new rates a year from now. They are set to take effect a month before the 2020 presidential election.

Back in Pearland, Victor Cisneros hopes his annual flood insurance bill doesn’t go any higher than the $400 he’ll have to pay when the remodeling is done. But as new neighborhoods continue to pop up all around him, he knows his flood risk will only increase.

CISNEROS: Because all we have is raw land at the current time, most of the land absorbs the water. And by them putting in townhomes, and new communities, and big parking lots, the water can no longer be absorbed by the land. So now you have to create a flow for it. This whole area is basically in the path of it as they still continue to start building new construction.

For WORLD Radio, I’m Leigh Jones reporting from Pearland, Texas.

(Associated Press/Photo by Charlie Riedel) A man stands in the doorway of his flooded home in Houston Monday, responding to an offer to evacuate. 

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