Broken flood insurance should help people move, not rebuild

Hurricanes Harvey, Irma and Maria, have exposed a major shortcoming of the National Flood Insurance Program: federal flood insurance is ill-prepared to handle the major flood events that are becoming all-too frequent.

Even before these extreme storm events made landfall, the program paid out more in damage claims than it collected in premiums, making the program not only broke — it was $24.6 billion in debt before Harvey hit — but also broken. Billions of dollars in insurance payouts went to the same properties that have flooded five, 10 or even 20 times. 

{mosads}As currently structured, the flood insurance program can inadvertently trap homeowners in a cycle of flooding and rebuilding. Congress must find a solution that not only puts the program on a path to financial stability, but also helps homeowners get out of harm’s way.

The federal flood insurance program provides extensive assistance to rebuild properties in the aftermath of a flood disaster, but minimal assistance to help reduce the flood risk that those properties face. People from both political parties have begun to ask whether rebuilding in same vulnerable way and in the same vulnerable location is the best option for families and taxpayers. What if the program, instead of rebuilding these properties multiple times, provided assistance to homeowners who desired to move somewhere safer? 

Obviously, the best way not to flood is to avoid living in a high-risk area. However, that’s easier said than done. First, flood maps may not clearly communicate the true risk of flooding that people face. A common misconception is that if a home is located outside the 100-year flood boundary depicted on the map than it’s safe from flooding. Recent disasters show that clearly is not the case, especially as floods of greater magnitudes are occurring more frequently.

Second, many states do not require that a homebuyer or a seller be told of a property’s flood risk, meaning an unsuspecting buyer may only learn how vulnerable they are after being flooded. Thus, if there was greater effort in reducing flood risks, rather than rebuilding, the National Flood Insurance Program would help thousands of homeowners trapped in a bad situation.

In a recent study, the Natural Resources Defense Council analyzed more than 30,000 properties that were classified as “severe repetitive loss properties” by FEMA. On average, these homes flooded five times and were rebuilt by the flood insurance program every time. Over 40 percent of these homes received more in insurance payouts than the home was worth. For many homeowners, who may have preferred to move to somewhere safer rather than rebuild, it would have been cheaper for the federal flood insurance program to help them do just that. Unfortunately, the program does not work that way.

That needs to change. For every $100 spent to rebuild homes through the flood insurance program, FEMA has only spent $1.72 to help people, who voluntarily choose to do so, move to out of high-risk flood zones. 

In the long-run, providing such assistance could save the flood program money because once a property is bought out, the land is converted to open space. This approach removes the property from the program, eliminating the burden of continually paying to rebuild it. For homeowners who would like to escape the cycle of “flood, rebuild and repeat,” the flood insurance program should provide more assistance to make relocating to higher ground a viable option.

Rob Moore is a senior policy analyst with the Natural Resources Defense Council (NRDC)’s Water Program.  

Joel Scata is a project attorney with NRDC’s Water Program. Both are based in Chicago.