Flood Insurance

Senate Votes to Extend Federal Flood Insurance Funding

It's a regressive, debt-ridden program that transfers wealth from regular Americans to the rich.


Wes Paz/TNS/Newscom

The Senate voted 86–12 this week to keep funding the National Flood Insurance Program (NFIP) until November. The House passed the same bill last week, so it's now on its way to the president's desk.

Too bad. When Sen. Mike Lee (R-Utah) voted against the bill, he rightly called it "fiscally unsustainable" and "structurally unsound." It's also a handout to the rich.

When Congress created the NFIP in 1968, it was trying to shrink the role of federal aid in disaster-prone areas by offering incentives to undergo risk mitigation. But instead of reducing the need for federal dollars, the program done the opposite. The Congressional Budget Office estimates that the NFIP is around $30 billion in debt.

Lee tried to mitigate the fiscal blow with an amendment that would have capped the payouts at $2.5 million, but the measure failed to get enough support. Meanwhile, other legislators called for rushing the bill through. "We need to reform this program, but we also need to keep it alive through the end of hurricane season," said Sen. John Kennedy (R-La.). The NFIP insures more than five million properties; failing to reauthorize it would amount to "scaring" the policyholders, Kennedy said.

But the people who benefit from the NFIP do not tend to be impoverished Americans looking to rebuild their lives after hurricanes. Homes covered by the insurance program are, on average, more expensive than those not covered by the programs.

A Cato Institute report last year found that the median value of a subsidized coastal property was $402,768, while the median value for an unsubsidized property on the coast was a much smaller $339,842. Another study—this one from the University of Massachusetts, Dartmouth—found an "inverse relationship" between property values and premiums: The owners of higher-value properties paid a smaller premium than the owners of lower-value properties. In effect, taxpayers across America are subsidizing the lifestyles of rich people with waterfront homes.

Congress may want to create incentives for risk mitigation, but artificially low flood insurance premiums incentivize people to live in riskier areas. People should be free to choose where they want to live, but it's shouldn't be the role of the government—especially a government $21 trillion in debt—to take bail out wealthy citizens' risky decisions.