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 put back in many of the subsidies – and likely set off again risky development in sensitive areas.

How did we get here? Flood insurance policies in flood-prone areas are sold mostly by the federal government. The destruction caused by recent storms, and the ensuing multi-billion dollar coverage charges paid by FEMA, underscored what was long known: flood policies were priced at bargain basement prices. Flood maps were old and poorly updated, and political will to reform the system was lacking. Until Sandy. The 2012 bill—the legislative legacy of the storm—sought to shore up the finances of the federal program and move to a more market-based system.

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