As Congress Weighs Debt Forgiveness for Flood Program, Some Want to See it Reformed

The Senate is expected to vote this week on $16 billion in debt forgiveness for the National Flood Insurance Program, continuing the bizarre bipartisan politics that have defined the beleaguered Federal Emergency Management Agency. Meanwhile, Congress has less than two months to decide whether to reauthorize the NFIP, renewing calls for an overhaul of the program made especially urgent by the climate change-related increase in catastrophic storms.

The House approved the debt forgiveness in a 353-69 vote on Thursday. As The Intercept previously reported, the bill cancels two-thirds of the flood program’s debt while offering Puerto Rico a $5 billion loan from the U.S. Treasury — a baffling move considering the small island is already at least $74 billion in the red to a number of mostly foreign creditors, who aren’t about to give up their investments without a fight.

The difference? Puerto Rico is effectively a colony of the United States. The NFIP happens to help a lot of millionaires.

For that reason, the NFIP has historically been a rare spot of cross-aisle agreement, with loyalties divided more along geographic lines than partisan ones. Because homeowners living in floodplains are required to purchase flood insurance, the politicians who represent coastal constituencies tend to favor keeping rates low in order to keep them happy.

Yet the forgiveness — which came partially at the request of the White House — is still something of a surprise. Prior to a few weeks ago, Rep. Maxine Waters, D-Calif., who’s gained a considerable following among progressives for her opposition to President Donald Trump, was the main advocate pushing for her colleagues in Congress to forgive the flood insurance debt in its entirety.

The House’s vote for forgiveness this week was opposed by several conservative groups, and every one of Thursday’s 69 “no” votes came from the GOP. “The administration’s request to treat a $16 billion bailout for the failing federal flood insurance program as an emergency is irresponsible,” Heritage Action vice president Dan Holler wrote in a statement last week, arguing that forgiveness should have been offset with spending and tax cuts.

Part of the vote can be explained by sheer urgency: For obvious reasons, the NFIP’s lifeline was tied to a broader relief package that would be politically dubious to refuse. Per the government’s most recent estimate, the NFIP is $24 billion in debt, a figure bound to increase as damage totals from this hurricane season become clearer in the coming weeks and months. Without some kind of forgiveness, the program would likely have exceeded its $30.4 billion borrowing limit and been unable to pay out claims as early as October 23, according to a recent estimation from FEMA of when funds would run dry.

What might be most baffling about the program’s popularity in Congress, though, is that — outside of Medicaid and Medicare — the NFIP happens to be the only socialized insurance program in the country. Created in 1968 to fill coverage gaps left by the private insurance market, the NFIP is subsidized by FEMA and administered by private insurance sellers around the country.

It’s not just for the rich and their beach houses, either. Palatial coastal mansions by no means represent either the majority of the policies the NFIP subsidizes or its losses. The average value of some 75 percent of Severe Repetitive Loss properties — those that have flooded multiple times with high rebuilding costs, around 30,000 in all — is around $110,000, according to an analysis done by the Natural Resources Defense Council. The environmental group also found that just 0.6 percent of homes covered in the program account for over 10 percent of its claims. Around 1 percent of homes are responsible for around a quarter of claims.

The way flood insurance and associated programs are currently structured, middle- and working-class coastal residents simply don’t have many options other than to rebuild as is. After Hurricane Sandy, many people abandoned their homes altogether when they were unable to afford legally required upgrades. Staten Island residents — sick of multiple rounds of rebuilding — embarked on an exhaustive campaign to get New York State to free up funds for relocation.

In the context of a near-total lack of planning for coastal adaptation, then, ire at the NFIP may be misplaced.

That said, the program carries flaws that need to be addressed sooner rather than later. In light of recent storms, Congress extended its five-year deadline to reauthorize the program from the end of September until December 8. Between now and then, many are hoping for a deep overhaul.

The main body that’s been arguing for reforms is an oddball coalition called SmarterSafer, which houses everyone from green groups, like the NRDC, to private insurance companies to free-market think tanks, such as R Street, a spinoff of the Heartland Institute that — unlike its progenitor — doesn’t deny climate change.

SmarterSafer lobbyist and spokesperson Jenn Fogel-Bublick told The Intercept that the group was also dismayed by the relief package, though it didn’t go as far as Heritage Action in opposing it. “We’re not saying [the debt] shouldn’t be forgiven, but that it shouldn’t be forgiven unless we’re making real reforms. … We’re not even urging folks to vote no on the package,” she said shortly before last week’s vote in the House. “We understand that the first order of business has to be to get claims paid, to make sure people can rebuild.”

Among other reforms, the coalition hopes that any eventual reauthorization will include provisions for more accurate flood mapping and more private sector involvement in the flood insurance market, as well as a move away from subsidized rates and toward more “actuarily sound” policies, with some level of means-tested relief for lower-income coastal homeowners.

For better and for worse, the 15-point plan offered by the White House after Harvey and Irma includes several of the coalition’s demands and was drawn largely from the reauthorization bill the House Financial Services Committee passed in April. Among the administration’s more admirable proposals is a prohibition on new policies for buildings constructed in floodplains after 2021.

Rob Moore, senior policy analyst for the NRDC’s Water program and the author of the NFIP analysis referenced above, suggests a more holistic approach to reform than simply revoking policies or making them reflect market rates. “We need to preserve affordability,” he told The Intercept, “but insurance doesn’t stop flooding from happening. We also have to back that affordability up with other kinds of assistance — to move out or relocate when living in a certain place becomes untenable.”

One clear takeaway from climate data is that plenty of NFIP-insured homes will be virtually uninhabitable in the not-too-distant future — if they aren’t already. “With sea level rise,” Moore explained, “everybody is not going to be able to live in the same place where they live today.”

While the Trump administration is unlikely to admit it, climate change is only making catastrophic, home-wrecking storms like Harvey, Irma, and Maria more likely, increasing the severity of storms rather than their frequency. Referring to this year’s hurricane season, as well as destructive wildfires out West, Moore said, “These all look like things scientists told us to expect thanks to climate change.”

Those changes are also going to be expensive. Statistics collected by the National Oceanographic and Atmospheric Administration drive this point home. While the agency’s data doesn’t yet include figures from Harvey, Irma, and Maria, it shows that weather events costing over $1 billion (adjusted for inflation) have spiked in the last decade. This year rivals only 2011 in terms of the sheer number of billion-dollar disasters experienced at this point in the year, with 15 such events happening within its first nine months.

As temperatures rise, policymakers will face far bigger hurdles and line items in adapting to climate impacts than the NFIP’s budget — whether they admit the reality of warming or not.   

Top photo: An aerial view of an area that was reclaimed by a nearby mangrove during the passing of Hurricane Maria in Manati, Puerto Rico, on Oct. 6, 2017.