Flood claims cost the US billions, but Congress can fix that
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Major flood events are becoming the new normal. In 2016, there were four inland floods causing at least $1 billion in damages each, double the average number of nontropical storm-related floods since 1980.

While the headlines around these events focus, understandably, on property damage and the impact on individuals and families, a big piece of the story — the escalating cost to the federal government — is often left untold.

With each flood, as victims piece their lives back together, millions of dollars in claims pour into the National Flood Insurance Program (NFIP), which provides federally backed coverage to homeowners and small businesses in more than 22,000 communities across the United States. And millions more flow from federal agencies to repair roads and public buildings, rebuild damaged utilities, or provide temporary housing and other disaster assistance.

These response and recovery expenses, along with insurance claims payouts, have a serious impact on the nation's spending.

The debt of the NFIP has ballooned to nearly $25 billion. If the status quo is maintained, there is no way to reverse this financial burden and pay down the debt short of an unprecedented and implausible end to catastrophic storms. The NFIP's dire finances have led the Government Accountability Office — citing the program's vital importance, financial instability and predicted future risk — to include it since 2006 on the agency's yearly list of high-risk government programs.

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The strain on the NFIP is due to numerous factors, but one in particular sticks out as both highly problematic and ripe for a new solution: properties that repeatedly flood. Nationwide, there are 150,000 such structures, historically representing roughly 1 percent of NFIP-insured properties but accounting for around a third of annual claims.

 

Between 1978 and 2011, the policyholders for these properties filed claims totaling nearly $12 billion. About 10 percent of these properties have had cumulative losses that exceed the value of the home, according to a 2009 report from the Department of Homeland Security's Inspector General.

That means that some 15,000 homes and businesses in the U.S. are flooded so often, or so severely, that the ensuing repairs cost more than the property is worth.

In Alabama, for example, a home valued at $153,000 has cost the NFIP $2.3 million in claims payments. Similarly, a Mississippi home valued at $69,900 has flooded 34 times in 32 years, costing the program $663,000. This imposes tremendous costs on taxpayers and the federal government, and the problem is only expected to get worse.

Since 1978, the number of repeatedly flooded properties has grown by approximately 5,000 a year.

Congress, specifically, can and should break this dangerous and costly cycle of repeated flooding and rebuilding. As lawmakers consider reforms to put the NFIP on more sound financial footing, they should include a bipartisan proposal that requires participating communities to identify repeatedly flooded properties and infrastructure — and put plans in place to mitigate the threat in these flooding hot spots.

But the challenge does not end here. Flooding is the most common and costly natural disaster in the United States. It threatens lives, erodes financial security and destroys infrastructure and property. Looking ahead, experts anticipate that the likelihood of flooding in areas directly deemed at a high risk will increase by 45 percent by the end of the century. And even before then, flooding in those areas is expected to cause damage to as much as $106 billion worth of real estate by 2050.

To help home buyers make informed decisions, Congress should also increase the transparency of the NFIP and require a single, national standard for disclosing a property's flood history. Time and again, homeowners and renters are unaware of the risk of flooding on their property, often because in some states, sellers and landlords are not required to disclose that risk.

Only by reforming NFIP policy can Congress help localities gain a greater understanding of the dynamic and serious nature of flood risk and problem areas. New emphasis on areas flooded over and over again, coupled with new levels of transparency, will compel smarter planning and better decision-making about living and building in risky areas.

By creating incentives for better flood preparation by individuals and communities, congressional reforms could help save lives and curtail the financial drain on the program. If Congress can achieve that, our country will be far better prepared to weather, and recover from, the next wave of floodwaters.

Laura Lightbody leads the Pew Charitable Trusts' initiative to help communities reduce the effects of weather-related catastrophes on the U.S. economy and environment through national policy reform.


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