The National Flood Insurance program is a disaster on more levels than I can even count. For the uninitiated, allow me to explain:
If you live in an area that is prone to flooding (say, for example, a large, historical city that is below sea level or in a coastal area that historically floods during hurricane season), no mortgage lender is going to want to lend you the money to buy a house there, because the odds are pretty good that the house will flood before you finish paying for it. If your home floods before you finish paying for it, the odds are pretty good that you'll just walk away from the loan, leaving the lender to hold the bag. Now, the lender can either charge an exorbitant interest rate to attempt to account for this risk, the lender can refuse to lend in flood-prone areas, or the lender can require the purchaser/borrower to carry flood insurance.
For areas that are, as a whole, prone to flooding, option #3 tends to be utilized frequently. The problem with flood insurance is the same with lending money to buy houses in flood-prone areas: the odds are pretty good that people's homes will flood. As such, insurance premiums on flood insurance are not cheap. By way of example, a relative of mine resides in Broad Ripple and has to pay upwards of $400/mo (I believe) for flood insurance on his house. $400/mo ain't chump change. It's also the premium for flood insurance in Indianapolis, a place that is nearly 1,000 miles away from the ocean. This insurance is also subsidized by the government.
Needless to say, flood insurance is expensive. That's a big reason of why the government subsidizes it, and for my relative, government subsidy is a good thing, worth untold amounts in flood insurance premiums. I would bet that subsidized flood insurance for those in Speedway who live in the flood plain is likewise a good thing.
I still think it needs to go.
Subsidizing flood insurance, while a well-intentioned plan, has horrible unintended consequences. Here are a few:
1. Because flood insurance is subsidized, it brings down the cost of coastal living and helps contribute to the degradation of our nation's barrier islands, wetlands, and coastal areas. I appreciate a beach vacation as much as the next guy, but the FL panhandle was initially covered in Mangrove trees precisely because it got repeatedly hit with hurricanes during the late summer/early fall. Now that condos can have subsidized flood insurance, all of the coastal areas are now covered in condominium resorts. This is great for Spring Break, but it is terrible for (a) indigenous wildlife; (b) hurricane and weather mitigation; and (c) fossil fuel consumption control (just think about how many power plants have to run to keep all those a/c units going). I could continue, but the point is fairly clear that coastal living contributes to the environmental degradation of those coastal areas. There's a reason that people didn't develop on the coast until about a hundred years ago, and it has very little to do with a supposed distaste for the beach in our Victorian forefathers.
2. Flood insurance is a subsidy for the wealthy, by and large. Who can afford to own beachfront property? I assure you, it's not cheap. Even owning a 2-bedroom condo on the beach can run upward of $500,000, and that's not even in the "stylish" areas like South Beach but rather in the panhandle of Florida. Half a million dollars for a vacation home, and you're asking me to help pay your insurance premiums? Thanks but no thanks. I believe that if government is going to subsidize things, one of the foundational questions should be, "Does this person need the help?"
3. Flood insurance encourages risky behavior. Let's face it, building next to the ocean is risky. If people had to pay the full cost of the risks they bear, they would likely bear fewer risks.
4. Building in flood plains, even if they are away from the coast, contributes to environmental degradation. Wetlands and flood plains are often the same thing, and wetlands act as nature's water filter. We need more wetlands, not fewer. We should not be subsidizing the building of structures in places where our health depends on not building structures. This seems like a fairly elementary principle: don't encourage your populace to do things that are bad for them.
5. Our nation has bigger priorities. We have trillions of dollars in debt. We have trillions of dollars in yet-to-be-funded healthcare and retirement obligations to our populace. We don't need to be handing money to people so they can put their houses in an area where the house is likely to be destroyed, just so we can start the entire ridiculous charade over.
I could go on and on.
Yes, I recognize that flood insurance protects the value of people's assets. My relative's Broad Ripple house would be worth very little if the cost of flood insurance doubled or trebled; so too would the houses in Speedway that are in a flood plain.
It saddens me that elimination of this program would have so many negative side effects. However, I think that if it were phased out, perhaps over the course of 30-50 years, the hit would not be nearly as sudden, drastic, or sizeable. Nonetheless, given our nation's pressing needs, I believe that continuing to subsidize the vanity purchases of the wealthy at great environmental and human costs is simply a poor policy choice.
This post is purposely written to be a compliment to my post regarding the fruits of one's labor. When people choose to move to flood-prone areas, that is their right. However, they do not have the right to demand that I subsidize that choice.
Food for thought. Happy Thursday.
UPDATE: Apparently I jumped the gun to discuss this prior to Hurricane Irma making landfall. For what it's worth, the National Flood Insurance Program (that subsidizes flood insurance) was $24,000,000,000 in debt before Irma and Harvey made landfall. Given my personal policy choice, I would rather spend $24bn in public money on food or healthcare for poor kids as opposed to subsidizing the McMansions of the wealthy . . . that's just me. Others have their own policy preferences, of course.
No comments:
Post a Comment