Bacon's Rebellion

Democracy Thrives in Sunlight

Flood Insurance: Subsidizing the Rich

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by

James A. Bacon
in , , ,

Flags show coastal property that FEMA moved out of flood zones, allowing owners to benefit from cheaper insurance.
Flags show coastal property that FEMA moved out of flood zones, allowing owners to benefit from cheaper insurance.

Owners of expensive condos and beach houses along the coastline are petitioning the Federal Emergency Management Agency to redraw flood-zone maps to exclude their maps from the flood zones. Getting the maps redrawn saves as much as 97% in flood insurance — but gives petitioners the same protection as their neighbors inside the flood zones. NBC News has identified more than 530 sections of coastal property — eight of them in Virginia — where the lines have been redrawn.

NBC News also found that FEMA has redrawn maps even for properties that have repeatedly filed claims for flood losses from previous storms. At least some of the properties are on the secret “repetitive loss list” that FEMA sends to communities to alert them to problem properties. FEMA says that it does not factor in previous losses into its decisions on applications to redraw the flood zones.

And FEMA has given property owners a break even when the changes are opposed by the town hall official in charge of flood control. Although FEMA asks the local official to sign off on the map changes, it told NBC that its policy is to consider the applications even if the local expert opposes the change. …

Because waterfront properties are expensive, and it costs thousands of dollars to hire an engineer to press a case with FEMA, the remapped properties tend to be luxurious, either the first or second homes of industrialists, real estate developers and orthopedic surgeons.

That’s 21st-century America — get rich, hire a bunch of lawyers, engineers and tax accountants, lobby the government for special privileges, and sponge off the less well-to-do. FEMA is doing the right thing by raising insurance rates on coastal properties to reflect real risks of flood damage. But a morally corrupt system allows the wealthy and well connected to evade paying their share. Populist conservatives like me don’t mind people getting rich — creating wealth is a good thing. But we resent like hell when the rich use their wealth and power to win privileges not enjoyed by others.

— JAB

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6 responses to “Flood Insurance: Subsidizing the Rich”

  1. jft Avatar
    jft

    From the libertarian perspective, isn’t the real question “Why is the flood insurance provided by the government instead of the private insurance industry?”

    The problem here is that folks are paying flood insurance premiums into the “National Flood Insurance Program,” which apparently is affected by FEMA flood zone designations.

    Seems cleaner to move away from a centralized, government-provided flood insurance policy and towards private policies. I’m sure private insurance companies would not ignore past flood events when evaluating a particular property.

  2. NewVirginia Avatar
    NewVirginia

    While real estate prices along the coast have skyrocketed in the last few decades and the vast majority of new housing has been high-end condos and mansions, their homeowners’ associations can always seem to find a poor little granddaughter of a waterman who’s on a fixed income and has had the land for fifteen generations. Surely she can’t be asked to pay a higher premium just to continue living as part of an age-old community?

    Not to be glib about such folks – they are real – but there is a much larger army of wealthy beach-goers who consistently hide behind them.

    From an environmental planning perspective, shorelines are the last areas that should develop – they need significant natural buffers to stay healthy and provide inland areas with protection from storms and erosion. But of course they are prime real estate, so they always go first. I don’t know how to solve that in a more libertarian/conservative framework – maybe pay a special tax to develop environmentally-sensitive land that is valuable to the entire population? But it would be impossible to quantify that value – especially since people will always undervalue it until right before/after storm events.

  3. larryg Avatar
    larryg

    so… the insurance premiums of those in the less risky areas are going to go up to pay for those in more risky areas?

    only the “little people” will pay full premiums?

    you know we have the same problem with mortgages. why should anyone be able to write off interest on anything but the principal residence and even then just the median price ?

    so .. we’re going to gut entitlements but continue the loopholes and tax preferences for those who are well off in comparison?

    1. James A. Bacon Avatar
      James A. Bacon

      Entitlements aren’t just for the poor. The mortgage interest deduction is akin to an entitlement. If we want to get a smidgeon closer to income and wealth equality, the best way to accomplish that is not by raising tax rates — it’s going after the entitlements of the well-to-do. Things like FEMA flood insurance subsidies, the mortgage interest deduction and tax breaks for gold-plated health plans.

      1. larryg Avatar
        larryg

        but in the general scheme of things – when we hear cries that we are headed for boomergeddon because entitlements are out of control – most folk don’t think you’re talking about subsidized flood insurance or mortgage deductions for million dollar second homes.

        so Grandmas Medicare is competing against subsidized flood insurance and mortgage deductions for million dollar homes – and we’re blaming grandma for bankrupting the country…

        eh?

        http://www.cbpp.org/cms/?fa=view&id=4055

  4. Peter Galuszka Avatar
    Peter Galuszka

    Old game that has been going on for years especiallyin north caroline where expensive homes are built on flimsy sand

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