Yesterday afternoon, the Senate passed the Homeowner Flood Insurance Affordability Act on a bipartisan vote, 67-32.
This bill encapsulates why it is so difficult to make any progress on climate change.
The flood insurance legislation that the Senate passed yesterday actually rolls back a different flood insurance bill that became law in 2012. The goal of that bill was to make the National Flood Insurance Program (NFIP) economically sustainable.
The NFIP is a program that Congress set up in 1968 to offer flood insurance to homeowners in particularly high-risk areas. In return, communities must adhere to certain floodplain management regulations. In addition, many homeowners received subsidized rates of flood insurance under the program.
This has become an issue in recent years as major national disasters such as Hurricane Katrina and Superstorm Sandy have devastated coastal areas. These disasters have nearly bankrupted the Federal Emergency Management Agency (FEMA), which administers the NFIP. As of September 2013, FEMA owed the Treasury Department $US24 billion.
Basically, FEMA has been offering subsidized flood insurance to at-risk homeowners and as natural disasters have become more frequent, the agency has nearly gone bankrupt. That’s why Congress passed the Biggert-Waters Act (named after Reps. Judy Biggert and Maxine Waters) in 2012.
Biggert-Waters eliminated subsidized flood insurance for all second homes, vacation homes and businesses along with a few primary residences that were at risk of severe repetitive loss (very few of these). That accounted for about 438,000 policies. For the remaining 738,000 policies that received subsidized flood insurance, rates would rise incrementally over the next few years. (Almost all of these are primary residences.)
This was (mostly) a good bill. The NFIP is bankrupting FEMA and it doesn’t make any sense to continue offering subsidized insurance rates. These discounted rates only hide the true risk of living in these areas. The taxpayer ultimately foots the bill.
Here’s the problem: eliminating the subsidies caused many people to see substantial increases in their rates – five to 10 times higher in some cases. Lawmakers quickly heard from angry constituents who would be unable to afford flood insurance and might even walk away from their homes.
In response, Sens. Robert Menendez (D-N.J.), Mary Landrieu (D-Louis.) and Johnny Isakson (R-Ga.) agreed upon the Home Flood Insurance Affordability Act, which the Senate passed yesterday. Not surprisingly, all three of those legislators are from coastal states. Now, it heads over to the House, where fiscal conservatives are much less eager to gut the original law.
For once, they’re right.
Combatting climate change is going to be costly. Very costly. There’s no getting around it. If we are ever going to do anything about it, we need to accept that.
In this case, doing so meant eliminating subsidized flood insurance. But for those that receive subsidized flood insurance, that’s expensive. In this case, Congress underestimated how much rates would rise, but that only goes to show how flawed NFIP currently is.
Instead of gutting the law, Congress should have found a way to alleviate the affordability concerns of homeowners while ensuring that insurance rates continued to rise to their full rate. The Government Accountability Office (GAO) released a report on January 22 that advised offering means-tested subsidies to homeowners to do just that. In particular, the GAO emphasised the importance of raising awareness of the risk of living in these areas by ensuring that homeowners are aware of the true cost of insurance.
That last part is vital.
If we are actually going to do anything about climate change, we must first make sure everyone has a full understanding of its costs. Then, lawmakers must be willing to impose those costs on people who will react angrily and find ways to help out those with affordability concerns. They cannot just undo any progress as soon as they face any pushback.
The Biggert-Waters bill was a small test of their resolve.
On that, the Senate failed yesterday.
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