Federal flood insurance is part of the problem
Thursday, June 13, 2013
Beth Cody, Writers’ Group member
Iowa City Press-Citizen

Yes, here we go again. The water rises yet again – the third major flood in many Iowa City area residents’ memory – even if we luckily get off a bit easier this time. Still, a number of residents will suffer loss of property and the stress of evacuation from their homes.

And many of them will rebuild yet again in the very same flood-prone locations, encouraged by the money they receive from taxpayer-subsidized flood insurance. Rinse and repeat.

The National Flood Insurance Program (NFIP) was created in 1968 to address the supposed “market failure” of private insurers failing to offer cheap insurance for high-risk flood areas. This had served to discourage building in such areas before NFIP, and it’s not a coincidence that the overwhelming majority of structures that will suffer damage here in Johnson County were built after 1968.
Some people might say that pricing insurance to discourage risky behavior made a great deal of sense. But those people clearly don’t understand that Americans now have a “right” to live wherever they want, at others’ expense.

People love to build their houses and vacation homes with beautiful river and coastal views. And land in low-lying areas is usually cheaper (for a good reason), which allows low-income residents to spend more of their limited funds for building a house and less for land (and insurance).

No one wants to make it unaffordable for poor people to build houses, but are we really doing them a favor by enabling them to build in areas likely to suffer repeated destruction? And why are middle class taxpayers subsidizing the vacation homes of the wealthy?

When NFIP was established, the premiums were supposed to help cover the cost of federal disaster relief, lowering the cost to taxpayers. NFIP was sold as a way to manage risk in flood-prone areas. However, NFIP doesn’t actually “manage” the risks (like insurance companies do), but actually increases both the risks and costs of flooding.

First, it charges premiums that are far too low to discourage building in risky flood areas, which has: 1) vastly increased the number of people who now live in harm’s way, 2) resulted in billions more dollars in claims which must be covered by taxpayers because the premiums are also too low to cover the increased claims, and 3) resulted in environmental damage to coastal and wetland areas due to this subsidized development.

And NFIP is so poorly designed and run as to defy imagination. Congress and local officials have ensured that claims payouts have no strings attached, encouraging repeated rebuilding without modification on the same flood sites. It’s estimated that 2 percent of properties covered by NFIP have had multiple losses accounting for 60 percent of the program’s total claims.

Numerous properties have collected millions of dollars each in multiple disasters; over 2,300 of these “repetitive-loss” claims have been made in Iowa since 1978.

NFIP may be one of the worst federal programs ever instituted (and that’s saying something). A flood insurance program that results in more people being hurt by floods, greater flood damage and higher costs for everyone is a program that should be immediately abolished.

The federal government could offer – only once – to purchase flooded properties and repurpose them as parks or undeveloped areas; homeowners would be free to decline, with the understanding that they would be responsible for all costs of private flood insurance at market rates thereafter.

If wealthy people want coastal vacation homes, let them pay $10,000 a year for flood insurance – they can afford it if they really want to see the water. And low-income people would be better off relocating from areas that force them to rebuild their lives every decade.

This won’t be the last time we watch the waters rise here in Iowa City, but, depressingly, homeowners will continue to rebuild again and again, relying on their taxpaying neighbors to fund their irresponsible decisions.