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The National Flood Insurance Program was already $24 billion in debt before Harvey and Irma

America needs to dramatically rethink how it handles flood insurance.

Hurricane Harvey Slams Into Texas Gulf Coast Photo by Joe Raedle/Getty Images

Soon after Hurricane Harvey recovery efforts got underway in Texas, Hurricane Irma started pummeling Florida. Though Irma hasn’t dumped anywhere near the 50-plus inches of rain Harvey unleashed on Texas, it was still a massive storm that brought destructive storm surge, rain, and heavy winds to Florida. Flooding is the primary worry this week as the storm moves into Georgia and the Carolinas, with up to 15 inches of rain still forecast for some parts of Florida.

While Hurricane Katrina in 2005 still holds the title of the most expensive natural disaster in the US at $160 billion, Harvey alone — not to mention Harvey and Irma combined — could leave it in the dust. The two hurricanes could cost US taxpayers around $200 billion, estimated Larry Larson, a senior policy adviser at the Association of State Floodplain Managers.

“I expect Harvey will be equal to if not beyond Katrina,” Larson said.

As Texas and Florida residents begin recovery efforts, those who are insured through the federal National Flood Insurance Program will get money to help rebuild their homes. The NFIP is administered through the Federal Emergency Management Agency. Those with flood insurance through NFIP can expect to recoup at least some of the damages and get the cost of their flood repairs covered.

Compared with Texas, where just 12 percent of the population has flood insurance, many more Floridians have policies. When it comes to floods, Florida homeowners are the most insured in the nation. There are about 1.7 million policies in the Sunshine State, which is about 35 percent of the nation’s total flood insurance policies.

While the NFIP helps bail out thousands of homeowners, it also has myriad problems; it’s $24 billion in debt, and is designed to pay out claims over and over again in the most flood-prone areas, where some houses have been flooded multiple times. Strong hurricanes helped plunge the program into debt, and global warming is only making storms more powerful.

FEMA directors under both the Trump and Obama administrations have said the program isn’t sustainable, and they want to shift costs to states and municipalities. So while Harvey and Irma victims could be helped by this federal program, future homeowners might not be so lucky.

What is the national flood insurance program?

The National Flood Insurance Program was created by Congress in 1968, after Hurricane Betsy caused extensive flooding in Florida and Louisiana three years earlier.

Policymakers realized that building taller levies wasn’t going to stop flooding. So the federal government decided it would sell insurance to homeowners, but with an important caveat. Congress wanted to insure older, existing houses in flood-prone areas, while incentivizing new houses and development to be built elevated above the floodplain, so they wouldn’t get continuously flooded and keep costing the federal government money.

At the time, it seemed like a great idea; government officials assumed that the older houses would eventually turn over and be gone, and they wouldn’t have to deal with them — and could instead focus on flood mitigation with newer, elevated buildings. And for a while, it worked. Storm surge stayed relatively low, and for decades the NFIP ran in the black.

The turning point for the program came in 2005, when the Category 5 Katrina decimated New Orleans and parts of the Gulf Coast, soon followed by Rita and other storms. The 2005 hurricanes plunged the NFIP into debt, which was made worse by Hurricane Sandy in 2012.

Currently, about 5 million houses in the US are flood-insured, which is about 45 to 50 percent of the properties that sit in 100-year flood zones. People who own homes with federally back mortgages are required to get flood insurance.

The federal flood insurance program is a bit complicated, because it relies on private insurance companies to sell insurance to consumers. However, the federal government calculates the rate of premiums based on maps showing how flood-prone a particular area is.

When homeowners buy their insurance plan from a private company, a portion of that cost goes back into the federal flood program, making up the fund that the federal government uses to pay out claims during floods. But when a huge storm hits and the government has to make a big payout, taxpayers get caught picking up the rest of the tab.

A victim of its own success

For many years, everything was going as planned for the National Flood Insurance Program. A huge reason the program is struggling now is the federal government didn’t anticipate the severe storms we see today.

The National Flood Insurance Program is about $24 billion in the hole right now, which is directly related to Hurricanes Katrina and Rita in 2005, and Hurricane Sandy in 2012.

The big problem the NFIP ran into when Katrina hit in 2005 was that the old flood maps it was using to calculate insurance rates were very out of date. They predicted a low storm surge along the Gulf, nowhere near what it actually was. And because the government had predicted a lower risk, people were paying lower rates.

“We had gone through a very low storm surge for a number of decades prior to Katrina,” Larson said. “Now we have new data ... it went way up.”

So many people lost their homes during Katrina that the NFIP just couldn’t keep up. It had to borrow $18 billion from the federal government to pay out insurance claims and fell into debt. And that debt just increased when Sandy destroyed thousands of homes in New Jersey and New York.

The problem is, many of the maps used to calculate rates are still outdated, making it very difficult for the NFIP to make it back to financial solvency.

“Congress never set the program up to factor in the possibility of such events into the long-term financial plan of the NFIP,” said Rob Moore, a senior policy analyst for the Natural Resources Defense Council who specializes in water and flooding. “They have looked at these big storms and really only nibbled the edges of what it means long term for the flood insurance program.”

There has been reform to the program, reflected in higher rates people are paying. Sometimes, that can be really difficult for homeowners to swallow. For instance, after the federal government redrew the flood maps in Massachusetts in 2013, one woman was hit with a $68,000 insurance bill.

As Moore points out, we usually have this discussion when a major hurricane hits, but there are plenty of other, smaller floods that have just as much of an impact. And it’s only going to get worse as climate change causes sea levels to rise and warmer water contributes to stronger storms.

“In coastal areas, a flood map is out of date on the day it’s published,” Moore said. “What we think is the 100-year flood really isn’t anymore.”

We’re good at disaster response. We’re terrible at disaster mitigation.

The irony of the situation is that the federal government pours billions into repairs for houses that are probably going to flood again, said Moore and Larson.

The United States spends about $300 billion responding to natural disasters like Hurricanes Harvey and Irma. In contrast, we only spend about $600 million on mitigation — improving buildings so they won’t flood when the next storm comes. This is despite the fact that mitigation has a 4-1 payback, Larson said. The problem is that people often don’t want to spend money upfront to protect their house or business, and then get caught up in a cycle of rebuilding.

Earlier this year, Moore and the NRDC published a report showing that a small percentage of properties that flood repeatedly account for a disproportionate amount of federal insurance payouts.

Between 1978 and 2005, the NFIP paid out $5.5 billion to 30,000 properties classified as “severe repetitive loss properties,” or properties that have flooded an average of five times. These properties account for just 0.6 of the total properties covered by flood insurance, but they account for 9.6 percent of paid claims.

“Are we going to take that same approach with 4-13 million people?” Moore said. “That’s a huge number.”

Many of these homeowners in flood-prone areas tend to get trapped there because no one else wants to buy a house that’s been flooded five times and has incurred more in damages than the home is worth.

“For the person who wants to leave, the market for homes that flood repeatedly isn’t very good,” Moore said. “There aren’t a lot of people out there who are like, ‘God, I want to buy a home that floods a lot.’”

Moore argues that money would be far better spent helping people relocate to higher ground so that people don’t keep rebuilding their properties only to get them destroyed again. But that conversation is slow to happen in Congress, where lawmakers are more preoccupied with how to make flood insurance more affordable.

Congress needs to reauthorize the program by September 30, although many in the industry are doubtful they will be able to come to a consensus about spending by the deadline. Even so, they are likely to extend the program until they can pass a reauthorization bill; if they don’t, it would effectively kick millions of people off their flood insurance and make private insurance companies unable to write policies.

These days, it’s not just flood insurance for private property that’s on Larson’s mind. Public infrastructure is increasingly at risk too, especially after President Trump recently signed an executive order reversing an Obama-era directive making the federal government plan for climate change.

Obama’s executive order required national infrastructure projects to take steps to mitigate flooding if they were building in a flood-prone area, which was especially important for things like water and sewage plants. Trump axed it about a week ago, arguing it was another burdensome regulation.

With stronger storms and rising seas, Larson said protecting federal projects is just common sense.

“We’ll be throwing a lot of taxpayer money at that, and protecting the investment makes good sense,” he said.

Correction: An earlier version of this article misstated the name of the Natural Resources Defense Council.