Ben-Shahar: Federal Flood Insurance is the Problem, Not the Solution

Lessons from Hurricane Harvey

As Hurricane Harvey continues to deluge Texas with devastating rains and floods, and as property losses reach astronomical levels, a pressing question, beyond how much human suffering it has left behind, is who will pay for the reconstruction?

In the immediate aftermath of every major catastrophe, a noble and irresistible sentiment of mutual support inspires disaster relief. At the rescue phase, when people’s lives are in immediate danger and temporary shelter is needed, such rescue is indeed a critical service that governments should provide. But what about rebuilding? Will the government use taxpayers’ money to help private property owners rebuild? Should it?

According to longstanding U.S. disaster relief policy, homeowners get almost no federal relief for reconstruction. This was made painfully clear after Katrina, when much of the destruction was not covered by insurance. Many Louisiana homeowners, especially among the poor, were unable to rebuild and abandoned their properties.

The same will be true in Texas. Homeowners will have to bear their own losses because the great majority of them did not buy flood insurance. Despite living in the projected path of storms, most Houston area residents failed to add flood coverage to their property insurance policies.