Americans tend to think of massive hurricanes and the havoc that they wreak as once-in-a-lifetime disasters. Sensationalist news coverage reinforces this narrative, using flurries of superlatives to describe, often in real time, the epic force and magnitude of natural disasters. We know, for instance, that Hurricane Harvey dumped more than 24.5 trillion gallons of rain when it hit Texas in late August, more than a year’s worth of rain in Seattle or Chicago. The only storms with comparable standing in public memory are Hurricane Sandy, which in 2012 flooded over half a million homes on the East Coast, and Hurricane Katrina, which in 2005 caused a storm surge that flooded much of coastal Louisiana, which killed more than 1,800 people and displaced over a million residents. Perhaps Hurricane Maria, which ravaged Puerto Rico in late September and destroyed much of the island’s power infrastructure, will soon make the list too.
These natural disasters caused exceptional levels of human suffering and economic cost. But they are by no means isolated incidents. “Billion-dollar” disasters—natural disasters that cause $1 billion or more in damages—are on the rise in the US: There has been an average of five and a half such events a year since 1980, but that number has almost doubled since 2012. In Houston, Hurricane Harvey caused the third “500-year-flood” (a flood whose likelihood in any given year is one in 500) in three consecutive years, making the term seem like quite the misnomer. Not enough data is available to conclusively state that climate change is making storms and flooding worse; however, we know that extreme rainfall events are more frequent and that global water temperatures are rising, making it easier for tropical storms to turn into deadly hurricanes. But grappling with climate change is only one part of the equation: In order to mitigate the fallout from increasingly frequent large-scale flooding, US policymakers must tailor their policies to ensure they incentivize risk mitigation, rather than increase the number of people in harm’s way.
Instead of encouraging people to better prepare their homes for flooding or to relocate, the NFIP’s artificially affordable insurance rates effectively do the opposite, encouraging people to stay in extremely flood-prone areas.
A critical part of this challenge is overhauling the National Flood Insurance Program (NFIP). Run by the Federal Emergency Management Agency (FEMA), the NFIP was created in 1968 to address the lack of attractive flood insurance on the private market. Within the NFIP, private insurers sell and administer policies on behalf of FEMA, earning a portion of the policy payments in return. The program offers people in any of over 20,000 participating communities the ability to protect their property against potentially catastrophic flood damage at subsidized rates—making protection available to many who would not have been able to afford it on the private market. In high-risk areas, any homeowners obtaining a federally backed loan are required to buy NFIP flood insurance. In the case of a flood, the NFIP provides up to $250,000 for damages to a home and $100,000 for damages to its contents.
The program was designed to act as a safety net while incentivizing homeowners and municipal governments to reduce the number of homes built in harm’s way. Its creators sought to provide “protection against the perils of flood losses,” and also to encourage “sound land use by minimizing exposure of property to flood losses,” by, for example, raising the elevation of homes.
In practice, however, the program tends to undervalue risk and underprice its policies. This is partly due to so-called “grandfathered” properties, whose premiums are kept constant even when the risk of flooding increases. Moreover, FEMA often uses outdated flood risk maps to determine how safe a home is: Local officials seek to minimize the amount of land declared to be in a 100-year-flood zone because of the onerous building regulations that apply. As a result, about 1 in 5 properties pays too little for the risks insured. Instead of encouraging people to better prepare their homes for flooding or to relocate, the NFIP’s artificially affordable insurance rates effectively do the opposite, encouraging people to stay in extremely flood-prone areas.
These design flaws have a real cost. In some years, repetitive loss properties—homes which flood repeatedly—make up 2 percent of NFIP’s insured properties but over 40 percent of its payouts. One $69,000 home in Mississippi flooded 34 times in 32 years, receiving $663,000 in insurance. Without adjusting premiums to reflect modern risk assessments, the NFIP creates excessive moral hazard.
The NFIP’s flaws are made apparent when superstorms make landfall, since the program’s undervalued premiums do not compensate for the payouts needed when disaster hits. Hurricanes Rita, Wilma, and Katrina forced the NFIP to borrow $17.3 billion from the Treasury. After Hurricane Sandy, the program stood in a whopping $24.6 billion of debt.
Efforts to address this debt began in 2012, when Congress passed a bill that cut subsidies and sought to make premiums reflect risk. However, outcry from policyholders who saw their rates increase quickly prompted a backlash. To slow the rate of premium increases and appease property owners hit by expensive, albeit risk-reflective rates, Congress scaled back many of the measures in 2014.
In the face of increasingly costly flooding disasters, elevating buildings and roads is an effective way to protect development projects in coastal regions.
Such are the politics of natural disasters. James Surowiecki of the New Yorker points out that research suggests “voters reward politicians for spending money on post-disaster cleanup but not for investing in disaster prevention.” As a result, prevention gets left by the wayside. This creates a misallocation of funds and a positive feedback loop entrenching homeowners in flood-prone communities, while burying the government program further in debt.
The NFIP—which will require reauthorization by Congress in December—needs to be overhauled. As glaciers continue to accelerate their melt, some predict global sea levels will rise around 3.2 feet by 2100, forcing more and more Americans to deal with the consequences. This is salient for the Gulf Coast, home to some of the largest concentrations of Americans living in flood zones, but also for the East Coast, notably New York City, Boston, and Miami. Chronic inundation—flooding at least every two weeks of at least 10 percent of a region’s area—will afflict Boston by 2080.
In the face of increasingly costly flooding disasters, elevating buildings and roads is an effective way to protect development projects in coastal regions. It is also the most economically efficient: For every dollar spent on disaster mitigation, the government saves $4 in post-disaster clean-up costs. A 2015 executive order by former President Barack Obama took a first step in this direction, mandating that all federal infrastructure and building projects plan for floods and rising sea levels. However, the Trump administration rolled back the order in August 2017, promising fewer bureaucratic hurdles for infrastructure.
Since elevating homes and building levees and floodgates will not solve the problem, planning for relocation is a drastic but necessary step, even if only to prevent people from inadvertently relocating into a different flood zone on their own initiative. Many Hurricane Katrina victims from New Orleans resettled 80 miles inland outside of Baton Rouge, only to suffer a 500-year flood there in August of 2016. To avoid such repeated tragedies, and in anticipation of losing over 1,450 square miles of coastal land in the next 50 years, Louisiana has embarked on a program to relocate coastal communities—marking an important recognition that investments should be made before, not after, the encroaching waters arrive.
The harsh realities confronting coastal communities in Louisiana and elsewhere cannot be addressed through changes to the NFIP alone. They require a much broader reckoning with the reality of climate change and its consequences for coastal cities across the country. Still, redesigning the NFIP is an important first step. In the interest of discouraging development in flood-prone areas, premiums should be adjusted to better reflect risk—particularly for homes that flood repeatedly. Moreover, prioritizing spending on investments in mitigation rather than repairs may entail costs in the short run, but it is the most efficient way to protect the 25 million Americans living in flood zones. For many, the question is often no longer if a flood will come, but when. To continue honoring its commitments to American citizens, a 21st-century National Flood Insurance Program must reflect that reality.