Flood Insurance

Since They "Built Where the Government Told Them," They Demand Government Flood Insurance Subsidies Be Restored


Flood Insurance

Congress may be about to repent its uncharacteristic act of fiscal rectitude and environmental protection by rolling back its flood insurance reforms from 2012. Prior to the reforms, government flood insurance program subsidies over the decades had encouraged lots of people to live, work, and build in flood-prone areas. Why not? It's really nice to live along the banks of a river or enjoy a sunset from the balcony of your oceanfront McMansion. And if a hurricane or flood knocks it down, cheap government insurance will pay for the rebuilding.

Eventually recognizing that the flood insurance program was a fiscal disaster and an environmental menace, Congress passed the Biggert-Waters Flood Insurance Reform Act. Yesterday, the New York Times reported:

The Biggert-Waters measure sought to reform the nation's nearly bankrupt flood insurance program, ending federal subsidies for insuring buildings in flood-prone coastal areas. Over the past decade, the cost to taxpayers of insuring those properties has soared, as payouts for damage from Hurricanes Katrina, Irene, Isaac and Sandy sent the program $24 billion into debt.

The aim of the measure was to shift the financial risk of insuring flood-prone properties from taxpayers to the private market. Homeowners, rather than taxpayers, would shoulder the true cost of building in flood zones.

Deficit hawks liked the idea because it would curb a rapidly rising source of government spending. Environmentalists liked the bill because they said it would reflect the true cost of climate change, which scientists say is ushering in an era of rising sea levels and more damaging extreme weather, including more flooding.

Well, that was last year. It turns out there was a reason why private insurance was not offering flood insurance to lots of the folks who were taking advantage of the government subsidized policies. The risks were too high for the premiums being paid. Who knew? From the Times:

But a year after the law passed, coastal homeowners received new flood insurance bills that were two, three, even 10 times higher than before.

In Beach Haven West, N.J., for example, Diane Mazzuca, a furniture showroom designer, had been paying $595 annually for flood insurance on her $90,000 home. After Biggert-Waters ended federal flood insurance subsidies last June, she got an updated bill — for $4,492….

Ms. Mazzuca has plenty of company. The insurance rate increases hit many of the 5.5 million coastal home and business owners covered under the National Flood Insurance Program, and came as the Federal Emergency Management Agency, which runs the program, was updating flood maps and placing thousands of homes inside flood zones for the first time. Last summer and fall, homeowners near coasts, rivers and wetlands saw their insurance rates soar and their property values plummet.

The homeowners' frustration erupted into a grass-roots lobbying campaign to roll back the Biggert-Waters act, and lawmakers in Washington quickly got the message.

For example, the pro-rollback interest group, the New Orleans-based Coalition for Sustainable Flood Insurance issued a press release arguing: 

To be clear, if Biggert-Waters 2012 goes forward unabated, hundreds of thousands, and perhaps millions, of Americans who have played by the rules, built where the government told them (emphasis added), maintained insurance, and never flooded will lose everything.

And so it appears that bipartisan majorities in the Senate and the House will be voting for the Homeowner Flood Insurance Affordabiiity Act. Did you catch that the National Flood Insurance Program is right now $24 billion overdrawn?

For more background, check out John Stossel's classic 2004 Reason article "Confessions of a Welfare Queen" in which the architect for his new oceanfront house tells him not to worry:

In 1980 I built a wonderful beach house. Four bedrooms—every room with a view of the Atlantic Ocean.

It was an absurd place to build, right on the edge of the ocean. All that stood between my house and ruin was a hundred feet of sand. My father told me: "Don't do it; it's too risky. No one should build so close to an ocean."

But I built anyway.

Why? As my eager-for-the-business architect said, "Why not? If the ocean destroys your house, the government will pay for a new one."

What? Why would the government do that? Why would it encourage people to build in such risky places? That would be insane.

Recall that one good definition of insanity is doing the same thing over and over yet expecting to get a different result. Sounds a lot like the normal operations of Congress.

Disclosure: I have bought flood insurance from FEMA for my cabin for the past 18 years.

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  1. Did I miss the program where the government orders you to build a beach house?

    1. You missed the one where the government shoulders the financial hardship of a regularly occurring total loss of your beach house. Say it with me now; “moral hazard”

      1. I realize that. I was responding to the quote from the homeowners that said

        built where the government told them.

        I am fully aware of the meaning of the term moral hazard. Turn your sarcasm meter on.

        1. Fair enough. Meter is on and re-calibrated

  2. The risks were too high for the premiums being paid. Who knew?

      1. Bitte schoen 😉

  3. I do have sympathy for the people who aren’t political and don’t really think about government. All they knew is they wanted to live near a body of water and they were willing to pay the cost for the flood insurance being offered. I doubt they considered themselves welfare recipients or hosing their fellow tax payers because they thought they were paying a fair price for flood insurance. The fed flood insurance policy should not take new policies and make payment on current policies under the condition they rebuild in an area not prone to flooding. Also if you let your premium lapse the policy should not be renewable. After phasing out all policies then the program can disband.

    1. I don’t have any sympathy for them. They’re whining that I’m not paying their bills for them anymore, and someone should make me. Fuck them.

      1. I’m with MS. Ignorance is no excuse to pillage your neighbors.

      2. If they own homes in expensive areas they are probably paying more in income taxes than they are getting in subsidies. If I could get enough tax breaks to make my taxes zero I would gladly take it and not feel the least bit bad about it. It was my money in the first place.

        1. Then they should be campaigning to have their taxes lowered instead of having mine raised.

          1. Look I agree. It would be better if everyone kept what they made and paid the true cost for goods without subsides. I just feel sympathy for the people who made a home purchase with certain expectations and now the government is changing the rules after the fact. If the government hadn’t been involved in the first place they could have made a more rational choice.

            1. Ordinarily, I’d agree. They bought a piece of property and had no idea the cost would go up $4000 a year after they’d agreed to the terms. I’m very sympathetic to that predicament. But when their response is “tax everyone else more and give me a subsidy,” my sympathy completely evaporates. Their proposed solution makes a bad situation worse for every taxpayer in the country.

              1. Ordinarily, I’d agree. They bought a piece of property and had no idea the cost would go up $4000 a year after they’d agreed to the terms.

                They’re free to go without insurance, if the price is too high. Houses normally cost less that $4K to rebuild, right?

                1. Their mortgage holder probably requires flood insurance, so going without may not be an option.

                  1. Then the mortgage broker can foreclose and then get a bail out for all the useless property. The system works.

            2. That’s the gambit you run when you rely on political institutions for your economic well-being. It doesn’t mean we should externalize unexpected costs onto others.

        2. If they own homes in expensive areas they are probably paying more in income taxes than they are getting in subsidies.

          The Federal government doesn’t give a shit where you live when they tax your income, so I am confused.

          1. I’m saying if you can afford an expensive home you probably have a high income level. I’m think most homes in flood areas are in expensive locations like river/beach front.

        3. A tax break isn’t the same thing as a subsidy. A tax break is when you’re allowed to keep what is already yours to begin with. A subsidy is something that came out of someone else’s pocket before it goes into yours.

          1. If it comes from the Feds it’s the same pot they put my stolen money in.

            1. The same argument goes for every level of government that taxes you. That same argument is used to perpetuate the taxation/redistribution mechanisms, that I assume you oppose. Stealing from the government is one thing, an agorist might even call it a moral act.

              But holding out your hand and claiming to be a legitimate recipient of that loot just reinforces the looting. No one is automatically entitled to the labor and production of others.

    2. It’s almost like they passed a reform that they knew full well they’d be rolling back later.

      1. Almost. The government is incapable of thinking in terms of economics or justice. Goods are taken and distributed politically, justice and economy have zero relevance.

    3. Also if you let your premium lapse the policy should not be renewable.

      You’d still be left with the property value complaint.

      I tend to agree with you. There are plenty of honest individuals who had no awareness of the subsidy they were receiving. BUT…in the end, all I can really say is…sorry, but NOW do you understand why Government sucks? I’m certainly not willing to bear the cost of yet another Washington clusterfuck. That’s like saying I bear an obligation to pay all these lavish pensions.

      Fuck all of you sucking on the fat tit of the state, innocent or not.

      1. sorry, but NOW do you understand why Government sucks?

        I can only hope that is the lesson they learn and not the government should do more.

        1. Obstructionism is why the government failed you. **rabble rabble rabble**

    4. I’m inclined to just say “fuck ’em”, but I think that the gradual phase out that you propose would be a lot more likely to actually happen.

      Getting rid of flood insurance subsidy should be an easy sell to environmentalists, people who hate the rich and others who are not usually on our side of things if you don’t make it too hard for the more sympathetic cases.

      1. The best case for winning over those types is to make specious arguments and make fallacious appeals to the common good. I’m afraid the abolition of flood insurance is just too damn reasonable to get them on board.

        1. Yeah, what should be and what actually is often do not coincide.

      2. You know who is really going to object? Realtors. Property values will tank in those areas.

    5. While MS is completely right about this from a strict libertarian perspective, that attitude isn’t winning us any friends with the general public and only reinforces our enemies’ critique that we are heartless.

      If we are to win this thing we need to have teachable moments and remember that we who are long-steeped in libertarian thought see things very differently than the general public who have internalized statist values.

  4. Stupid is as stupid does

  5. Perverse incentives are out there. They can’t be bargained with. They can’t be reasoned with. They don’t feel pity, or remorse, or fear. And they absolutely will not stop, ever, once you start them.

    1. I’ll be back…to rebuild on the flood plain.

  6. I just feel sympathy for the people who made a home purchase with certain expectations and now the government is changing the rules after the fact.

    Not me.

    To me, they’re no different than someone who opened up a solar power panel plant expecting to get tax credits, who is pissed that the program lapsed.

    Government handouts aren’t always forever. They usually are, but sometimes they aren’t. And if we’re not willing to let the hammer of reality fall on SOMEBODY who made some life decision in the context of a government subsidy scheme, we may as well close up shop.

    My other reason for having no sympathy is this: during my time in the mortgage industry, there was no borrower who was a worse little bitch than the guy who had to be informed that the FEMA flood certification said his property was in a flood zone and he had to buy the insurance. None. So not only were these guys robbing the taxpayer, they usually weren’t even grateful. They were pissed as hell and accused everyone in the world of ripping them off if they had to pay any premium at all.

    1. The thing is, some handouts are more obvious than others. SNAP is a clear handout. Flood Insurance? Do you really think Joe Homeowner is asking themselves “gee, why am I buying this from the Government and not from Amica?” I doubt it. It’s simply not perceived as a subsidy. I’d say the Mortgage Interest deduction is far more recognized as a “subsidy” then Flood Insurance.

      And that’s why they’re pissed.

      But still, in the end…Sorry. Too bad. Welcome to the You Got Fucked by RC”Z LAW club.

  7. “We can’t possibly cut SNAP because single moms made the decision to have 6 bastards from different fathers on the expectation that SNAP would be there. THEY FUCKED WHERE THE GOVERNMENT TOLD THEM! They played by the rules!”

    1. Good point.

    2. You are not wrong, but I still think that you’d be more likely to get support for ending a program like that if you phased it out by stopping or limiting new applicants than if you just stopped it all at once.

      1. “You are not wrong”

        That’s the highest form of compliment around here.

      2. Which is why I am cynical enough to believe they tried to stop it all at once on purpose – because they knew it wouldn’t last.

    3. In the local lefty rag several days ago was a story about how food stamps were now going to more people, suggesting, of course, that more people ‘needed’ them rather than the fact that the requirements had been loosened.
      To lend human interest, they featured a young, healthy woman with this description:
      She is mid 20s, has a kid, has returned to live with her parents (in what certainly looked like a very comfortable house), and she was using food stamps to buy food, since she was ‘saving to go to school’ for some worthless degree.
      Bet you didn’t your money is buying food for someone who is ‘planning to go to school’ sometime in the future.

      1. But to a leftist there are always more people needing taxpayer-funded handouts than actually receiving them. If the requirements are loosened they always moan about how they need to be loosened more.

      2. How can she guarentee her parents aren’t eating any of the food she’s buying?

  8. The premiums on my flood insurance are TOO DAMN HIGH!


  9. This argument could be used to prevent reducing literally any government program, ever.

    1. No, because there are lots of gov’t programs that people don’t base long-term plans on. What major investment is at stake in the US war in Afghanistan, for instance? Or publik skools? Or libraries?

      1. Sure, people might not be personally making long-term plans on. But markets do feel the impact, including the market for government services we all like to bitch about.

  10. For some unknown reason, I am watching the CYCLE (an, ummm, interesting name, to be sure) on MSNBC. College football players should be unionized. Everything good that ever happened in America was because of unions.

    Also, who is this Abby Huntsman girl? Any relation to john? Her mouth is ENORMOUS. How many tennis balls could she fetch at one time? Inquiring minds want to know.

    Toure- still an odious prissy douchebg.

    1. Daughter.

  11. “Coalition for Sustainable Flood Insurance”
    “I Want My Free Shit Club”

    1. I object to the use of the word “sustainable”.

  12. “What do you mean that 3% of the cost of my million dollar beach house is fair for a property you intend to fully replace every 30 years?!”

    This is why only really rich people had beach houses for a long time, and even those were mostly cheap things. Who the hell would insure you?

  13. “for flood insurance on her $90,000 home. After Biggert-Waters ended federal flood insurance subsidies last June, she got an updated bill ? for $4,492”.

    Well then, it’s not a $90,000 house anymore, is it?

    1. Replacement cost probably didn’t change any more than normal. The likelihood of a loss is just now better reflected in the cost of a policy.

  14. Coalition for Sustainable Flood Insurance

    Is this on the theory that inserting the word “Sustainable” into something automatically means people will think it’s good?

    Man, liberals must be retards if that even works a tiny bit.

  15. Daughter.

    I was afraid of that. She’s definitely on TEAM “Republikkkinz are EVUL.”

    That explains how she got a gig on MSNBC.

  16. Stossel had a story about rebuilding his beach house.

    1. Is that so? Hmm…I never knew…oh wait, I did know, because not only did I read it when he originally wrote it, BUT IT’S IN THE DAMN POST.


      1. I never read the posts. If there is an important point, somebody will tell me in the comments. Thanks, BTW.

      2. OK, having read the actual post, that was pretty blatant. Mea Culpa.

  17. This is why only really rich people had beach houses for a long time, and even those were mostly cheap things. Who the hell would insure you?

    Really rich, or really poor; when my family went to Florida when I was a kid, I was amazed at the number of crummy shacks in beautiful places on the water, but I later figured out they were just disposable houses. If you don’t spend more than you can afford to write off, it’s a form of self-insurance

  18. “Federal Emergency Management Agency, which runs the program, was updating flood maps and placing thousands of homes inside flood zones for the first time.”
    I think this is what people are upset about — they did their due diligence, saw where the flood plain was and an bought outside it. Now the Top.Men. have decided the flood plain is somewhere else.
    Sure, caveat emptor and all. Here in Penna. there’s another issue like this – the State wants to make riparian buffer be 100′ from current 75′. People who bought long ago, knowing they couldn’t build within 75′ of a stream are now told they can’t build within 100′. In my view, this is a taking under eminent domain and landowner should be

    1. ^^This.

      In addition to that, there are homes several stories above the water line where only an end-of-the-world size flood would affect them. Because it isn’t priced based on risk, flood insurance makes no distinction between these and FL beach houses.

  19. but… but… flood subsidies are just plain FAIR!!!!! at least that was the point of this article i read about this a week ago


  20. How about this: The government will subsidize your flood insurance for what was on the property January 1, 2013, and will pay out ONCE. Rebuild someplace else, or rebuild there, knowing that you are on your own. I have some sympathy for people having the rules changed on them (and this will drive down property values in flood zones, as the land will become nearly worthless), but this will also limit how much the taxpayers are on the hook for, eventually dropping to nothing.

  21. Anyway to fillibuster this crap? Man I can’t wait until the next fiscal Armageddon.

  22. McMansion

    Seriously Bailey?

    How about fuck off slaver.

  23. I find this sort of thing deeply frustrating.

    Every time we make even a tiny little gain, whether it’s the “Freedom to Farm” Act, or ending the National Helium reserve, or cutting flood insurance subsidies, or cutting Medicare reimbursements, or the sequester, within a year or two whoever benefits from this shit has formed a rabid foaming-at-the-mouth lobby to have the cuts reversed.

    And INEVITABLY the Republicans always cave. ALWAYS. They are totally useless fucking pussies. WORTHLESS.
    I don’t know who I hate more, the people who lobby for this shit, who after all are just being normal humans pursuing their self-interest, or the politcians who are MASSIVELY FAILING in their duty to do what’s right for the general public, and not let a few mooching assholes loot the rest of us.

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