What happened to affordable flood insurance?

A decade ago, floods made some strange bedfellows in America.

An unlikely coalition of free-market conservatives, good government groups, environmentalists and insurance industry lobbyists came together in 2012 to push Congress to reform the National Flood Insurance Program. The upshot of the bipartisan bill was simple: to end many of the federal subsidies for flood insurance premiums and to eventually stop the NFIP from borrowing from the Treasury to pay out claims.

Then reality set in. Homeowners across the country, particularly in flood-prone areas along the Atlantic and Gulf coasts, complained that they faced unaffordable rate increases — some as much as 500% — because of the NFIP reforms. The flood insurance program had to fully pay for itself by charging policyholders more. Just two years later, essentially the same coalition pushed Congress to roll back the reforms, reverting the NFIP to a more fiscally precarious position by hard-capping how much it could increase flood insurance rates each year.

The government has to balance keeping flood insurance affordable while being good stewards of tax dollars.

Last year, the Federal Emergency Management Agency, which manages the NFIP, took a significant step toward a new rate structure, attempting to more accurately reflect a property's actual flood risk, accounting for factors such as flood frequency and the cost of rebuilding.

This change, while well-intentioned, has had an effect similar to the well-intentioned reforms 10 years ago. Yearly flood insurance premiums have skyrocketed by hundreds of dollars — nationally, 77% of policyholders will see an increase. — and Houston-area homeowners have had enough. The Chronicle's Rebecca Schuetz reported last week that as many as 45,000 buildings in the region have dropped their NFIP policies. One out of every 12 buildings in Houston once insured by FEMA will not have that protection if and when another major storm sweeps through Southeast Texas.

While some of the premium increases will happen gradually — annual increases are limited to 18% under federal law — even minor rate hikes are out of reach for those who are living on the margins. At a time of economic uncertainty, when inflation is already stretching household budgets thin, protecting one's home from a flood has become, for some, an unaffordable luxury.

It's been five years since Hurricane Harvey devastated Houston and three years since Tropical Storm Imelda. We've been fortunate to dodge another major storm since then, despite several too-close-for-comfort hurricanes that have pummeled our Gulf Coast neighbors in Louisiana, Mississippi, Alabama and Florida. As another uneventful hurricane season comes to a close this year, and Houston and Harris County continue work on flood control projects, it's perhaps easy to be lulled into a false sense of comfort. That is, until we remind you that of the more than 204,000 homes and apartment buildings Harvey damaged in Harris County, three-quarters of them were outside the federally designated 100-year flood plain.

Yet in an effort to keep the NFIP solvent — it is currently $20.5 billion in the red — the federal government has lost track of the NFIP's original mission: affordability. As long as taxpayers are helping to subsidize the NFIP, the program has an obligation to the community at large to make it as accessible as possible. We applaud local nonprofits such as West Street Recovery for attempting to rectify the problem on a granular level — covering flood insurance premiums for 22 homeowners who can no longer afford it — but we can't simply rely on the benevolence of the private sector to solve such a massive problem.

Fortunately, there is an opportunity for Congress to take bold steps to both make the NFIP more affordable and more solvent. Congress has to reauthorize the NFIP by Dec. 16 or FEMA would have to stop selling and renewing policies nationwide. Since 2017, there have been 21 short-term reauthorizations, essentially kicking the can each time on making structural changes to the program and ensure financial stability. What if, this time, they decided to actually fix it?

A 2021 report from the Congressional Research Service, a nonpartisan public policy research institute, outlined a range of policy prescriptions Congress could consider to reduce the amount that NFIP policyholders have to pay. The most intriguing option is a means-tested affordability program that would target premium discounts or subsidies to qualifying households. An income-based approach, relying on median income or federal poverty guidelines, would require lower-income households to pay down a portion of the premium, with FEMA covering the remainder. If you're a multimillionaire with a beach house, well, too bad, no more subsidy for your afternoons with a boogie board. President Biden has already endorsed such an idea. In his original domestic agenda proposal, Build Back Better, Biden included $358 million for a program to help low-income people buy flood insurance and also protect their properties from flood damage.

The CRS report also includes several options for Congress to reduce NFIP debt, including wiping it out entirely or at least eliminating the $400 million a year in interest payments FEMA pays to the Treasury. There is precedent for such a measure: Congress already canceled $16 billion of the NFIP's debt in 2017. Congress could also change the way that losses from catastrophic storms are financed by setting a threshold for the maximum amount of losses the NFIP would be expected to fund. Anything beyond that threshold, the federal government would assume responsibility.

Of course, we also must not lose sight of the best long-term solutions — keeping people's homes from flooding in the first place. Houston and Harris County are undertaking a wide range of flood control projects such as requiring structures to be built higher, buying out properties in flood plains, preserving and restoring wetlands, as well as constructing massive storm surge protection systems such as the Ike Dike. The payoff from substantially reducing our flood risk from these measures is far greater than any short-term reductions in premium.

The reality of living in any low-lying, coastal city is that paying for flood insurance is an absolute necessity. It's time for Congress to act like it.

An editorial from the Houston Chronicle.