FEMA’s flood insurance overhaul could entrench inequities in coastal cities

Flood insurance is designed to help protect families from bankruptcy when disaster strikes. However, a new policy being rushed into place by the Federal Emergency Management Agency (FEMA) threatens to transform the National Flood Insurance Program from a financial lifeline into a crippling financial burden for thousands of low-income families in coastal cities.

This policy, which FEMA first promoted as “Risk Rating 2.0” and has recently been rebranded as “Equity in Action” is anything but equitable. The policy has been designed in a black box that doesn’t allow communities or property owners to proactively understand how their flood insurance premiums are changing or what factors account for those changes. 

While we don’t yet know for sure, it’s expected that flood insurance costs will skyrocket in many urban areas, including in New York City’s coastal neighborhoods. Many of these neighborhoods are among our last bastions of affordable homeownership, especially for communities of color that continue to experience the damaging legacy of racist redlining policies.   

With millions of Americans still reeling from pandemic-related unemployment and trying to catch up on their mortgage payments, raising premiums will force many households to choose between abandoning their insurance policies or cutting back on household necessities like food and transportation. 

Many will opt for letting their insurance policies lapse. If a hurricane strikes, uninsured families won’t be able to afford necessary repairs. A catastrophic scenario like this could drive thousands into foreclosure or even homelessness.

FEMA’s flood insurance overhaul is intended to address a legitimate problem. For decades, the federal government has insured high-risk properties — including those that already flood regularly — at artificially low prices. The risks to these properties are multiplying as climate change continues to worsen. Without changes, taxpayers will be on the hook for repairing more and more damages caused by intensifying extreme weather events. 

There is no question that reforms to flood insurance policies are needed to fairly account for risk. However, an approach that could decimate low-income communities in the midst of a historic crisis for working people is neither progressive nor just.

Several steps should be taken immediately to remedy this flawed approach. First, FEMA needs to engage in substantive conversations with communities that will be most impacted by their proposed changes, including New York City. From the very beginning, the development of Risk Rating 2.0 has been shrouded in secrecy, and the agency has not offered adequate transparency into their decision making, methodology and overall approach. 

They should begin reaching out to cities and counties to listen to local concerns and better understand local data sources that have been overlooked. It’s also critical that they provide clear information to residents so they can adequately prepare for rate changes. 

Second, FEMA needs to postpone the rushed rollout of Risk Rating 2.0 to account for legitimate concerns about affordability and equity. Under their current schedule, the new rates will start to be implemented in October. However, FEMA still has not shared any information with local governments about who will be affected and to what extent. Such a short runway is unacceptable and dangerous.

Finally, Congress must intervene to ensure that affordability is prioritized. The best way to directly address the shortcoming of Risk Rating 2.0 is by passing reforms to the National Flood Insurance Program, which is scheduled to expire later this fall.

These reforms have long been trapped in legislative limbo, with lawmakers having kicked the can down the road with more than a dozen short term extensions since 2017. Now, lawmakers from climate-impacted areas need to stand together and demand means-tested financial assistance that will help low-income families stay in their homes. They should also ensure that resiliency retrofits that reduce flood damage, such as elevating a home’s mechanical equipment, can be used to achieve lower premiums. 

Adapting our cities and coastal communities to the climate crisis is a herculean task that will take unprecedented levels of coordination between different levels of government, the private sector and even individual Americans. It demands thoughtful planning and will involve many difficult decisions over the course of many decades. 

These decisions must be carefully considered, and they cannot ignore the needs of frontline communities — many of which are majority Black and Brown. If FEMA truly wants to put equity into action, they should take a clear-eyed view of how Risk Rating 2.0 will undermine climate justice and reimagine their approach. 

Jainey Bavishi is the director of the NYC Mayor’s Office of Climate Resiliency.