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How We Have Ended Up Paying for 1 Percenters Beach Vacation Homes

It's time for the wealthy with vacation homes and valuable shoreline land to pay their own way -- and not rely on us.

Photo Credit: Rumsey


Last May, when conservatives still pretended to love cutting the deficit and liberals still pretended to want to combat climate change, a broad bipartisan coalition passed a sweeping flood insurance reform bill – by a  402-18 count in the House – designed to align the costs of insuring homes in flood zones with the realities of increased storm frequency.

But yesterday, Rep. Maxine Waters – the lead author of the law – stood with several of her colleagues and proudly introduced a bill that would stall the implementation by up to four years, delaying any increase in flood insurance premiums until 2017. It’s difficult to argue that homeowners in flood zones alone should have to bear the burden of massive rate increases. But shrinking from the real costs from climate change and delaying them, rather than facing up to how it will affect every aspect of our economy, is a testament to a political class that is simply not equipped to deal with the consequences of a warming planet.

The National Flood Insurance Program, designed in 1968 to provide mandatory federal insurance to Americans living in coastal areas, has been hemorrhaging money after  years of extreme weather. The NFIP, a division of the Federal Emergency Management Agency, is meant to be self-supporting through premiums, relieving the pressure on disaster relief funding. But the NFIP borrowed $19 billion from the Treasury in 2005, after damages from Hurricanes Katrina, Rita and Wilma. According to experts, its deficit after payouts from Superstorm Sandy approaches  $28 billion.

The Biggert-Waters reform legislation, named for former Republican Rep. Judy Biggert and current Democrat Waters,  was uncontroversial when it was introduced in 2012. It passed the House easily, and was eventually incorporated into a larger transportation bill that sailed through Congress. Biggert-Waters forced the creation of new FEMA maps to determine who needed flood insurance. It also allowed higher annual  premium increases – to 20 percent from 10 percent – so premiums could gradually come more in line with actuarial realities. And for high-risk homes built before flood maps were adopted, which enjoyed generous subsidies, flood insurance rates would increase 25 percent a year, until they reached a level commensurate with the actual risk. If the homes changed hands, they would immediately move to the risk-adjusted rates. Over time, subsidies for 1.1 million policyholders, 20 percent of the program, would be phased out.

The law represented an alliance between fiscal conservatives interested in bringing the NFIP back into balance, and some environmental groups, who believed that subsidizing homeowners with low flood insurance rates failed the test of making the costs of climate change real, and would delay the spur to action on reducing greenhouse gas emissions. “Repetitive loss” homeowners, many paying significantly discounted rates dating back to the 1970s, represent  one-third of all NFIP claims, according to the R Street Institute, and continual subsidies for them result in “nothing but environmental catastrophe and financial ruin,” according to R Street fellow R.J. Lehmann.

But if Congress was on board with reforming the NFIP in 2012, it wasn’t ready for complaints from homeowners in flood zones in 2013. People across the country lost their subsidies, and saw their rates grow  by 500 percent or more. One homeowner newly zoned into a flood area reported a  $68,000 flood insurance bill. Real estate agents said the hikes were  affecting home sales, because subsidized policyholders could not sell their properties to new purchasers who discovered  huge rate increases. Many of the properties affected were vacation homes and secondary residences. But poorer areas in Louisiana and places like Rockaway Beach in New York consist of modest, middle-class homes, and the residents could not afford the hefty increases.  Protests broke out in these areas, and members of Congress, who casually passed Biggert-Waters as a fiscal and environmental imperative, took the message.