Hurricane Harvey has ravaged Texas with flooding and rain – and Houston will be particularly hard-hit in the aftermath. That’s because only 15% of homeowners in the Houston area have flood insurance.
Houston’s building codes and zoning laws are unusually lax. Neighborhoods aren’t planned to mitigate flooding, and homes aren’t even required to have proper flood elevation. The lack of flood mitigation and flood insurance means the uninsured property losses in Harvey’s aftermath could be staggering.
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Given the scope of the disaster, it’s likely that calls will be made for an expansion of the National Flood Insurance Program that would give more working-class homeowners the ability to afford flood insurance. But Omri Ben-Shahar, a law professor at the University of Chicago, contends that calls to expand federal flood coverage would be “exactly the wrong lesson.”
“It would only guarantee an even bigger disaster when the next 500-year storm (which now seem to arrive in quick succession) hits,” Shahar wrote in an opinion piece for Forbes.
Shahar called government-subsidized flood insurance “a bad idea for two big reasons.”
First, he maintained, the main beneficiaries of flood insurance weren’t the poor, but wealthy homeowners with waterfront property.
“And, second, subsidies distort the incentive to develop real estate in devastation-prone areas,” Shahar wrote. “If property owners do not have to pay the full cost of living with extreme weather, they flock to such regions, passing on much of the disaster risk to unwitting taxpayers.”
Shahar pointed out that coastal areas of Florida have been rapidly developed for decades in the face of obvious hurricane risks. “This development is heavily subsidized with cheap insurance, both by the state (offering cheap wind losses insurance) and by FEMA (for flood losses),” he wrote.
Learn more about flood insurance at the Future of Flood Summit being held in Miami, Florida on November 16. Click here for more details and to register.
Government-subsidized property insurance has made it so attractive to live in waterfront communities, Shahar wrote, that coastal exposure now represents 80% of all property in Florida. Flood insurance is so artificially cheap that the wealthy are building and rebuilding so close the water that “models predict that in the next 60 years one out of four houses within 500 feet of the shoreline will be claimed by erosion,” Shahar wrote.
“What we need instead of a bigger flood insurance program is a viable private insurance market for floods,” he wrote. “Such a market would give home purchasers realistic signals about the flood risks they are buying into. It would give homebuilders incentives to build houses on higher grounds (or on stilts) and further away from flood plains, to present more insurable properties to their buyers. It would even motivate cities to write better building codes and zoning restrictions, to reduce local property insurance premiums.”
What do you think? Should the NFIP be expanded, amended, or replaced entirely by private insurance? Let us know your thoughts in the comments below.
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