Ben-Shahar on Government Flood Insurance

Washington Is Encouraging The Next Hurricane Sandy, By Creating New Subsidies For Flood Insurance
Omri Ben-Shahar
March 25, 2014

On the morning after Hurricane Sandy, homeowners along the Atlantic coast awoke to a new reality. Homes were flooded and much of their property ravaged. Not long after, many faced another shock – their insurance premiums were skyrocketing. Gone were much of the subsidized insurance programs in flood-prone areas sold mostly by the federal government, through FEMA’s National Flood Insurance Program. After footing the bill for much of Sandy’s losses (and ending up with a tab of $24 billion ), Congress two years ago decided to phase out the subsidized insurance, instructing FEMA to draw new flood maps and increase premiums.

Painful, to be sure, but smart public policy. The intent was to remove the senseless prop of government incentives – through subsidized insurance – to build in oft-flooded and increasingly erodible coastal land. But, policy has changed, for the worse, once again. With bi-partisan support, Congress has decided to reverse itself in the face of a storm of complaints from homeowners facing much higher rates. President Obama is set to sign the Homeowner Flood Insurance Affordability Act. This will