Business would handle floods better

The people of Houston will feel the pain of Hurricane Harvey for years to come. Many interviewed on television say they are leaving the city.


The chattering classes are talking about how Houston’s lack of zoning is the reason for the flooding. Others, predictably, are going on about how human-made global warming is the culprit, and surely President Trump will come, hat in hand, back to the Paris Climate Accords.

The chattering classes, as usual, are wrong. How soon we forget Superstorm Sandy and how it devastated the over-zoned Northeast. And no matter how much you believe in anthropological climate change, there is no way you can pin any single weather event on the phenomenon.

The real problem is much more simple. Wealthy boomers love to live by the ocean. And, predictably, because government loves to help rich people get what they want, government makes us subsidize their desire to see the waves lap up on their own private beach.

It wasn’t always this way. Beach fronts used to be for gritty working class immigrants who couldn’t afford to live downtown. Think Coney Island. Today, the wealthy populate beachfront property. Think Malibu and, lately, Santa Monica.

Traditional home insurance rarely covered flood damage. A fire will normally affect a single property. A flood could wipe out whole neighborhoods and even the fourth largest city. That has not changed. What changed was the role of the federal government in providing cheap flood insurance.

Federal flood insurance, sold through the Federal Emergency Management Association (FEMA), distorts the market incentives to avoid building on a flood plain. Worse, it makes it much easier to rebuild after a flood, and to keep rebuilding after the next flood. Established in 1968, the National Flood Insurance Program (NFIP), is a complicated series of subsidies that hide the actual risks that private insurance would have to raise its rates to cover. Over half of the insurance policies it issues are in Florida and Texas. Florida, a porous limestone sandbar barely above sea level, is now called God’s waiting room as millions of Northeastern seniors retire there largely because hard-working Midwesterners pay for the insurance on their retirement homes. After the Cajun Navy sails home, the FEMA Armada with its red tape and waste will invade the Lone Star State.

The NFIP is over 25 billion in debt to the federal treasury. Congress sold the program as a compassionate response to heavy flooding in the 1960s. They assured us that NFIP would help individuals living in flood plains bear the risk of floods while also encouraging future mitigation efforts, all while discouraging further building in the most flood-prone areas. Naturally, the exact opposite has occurred.

The risk of flood damage served to limit people’s interest in living in or developing flood-prone areas, which Congress should have recognized as a good thing, not a “market failure” that it had to address.

FEMA tries to emulate actual private insurance through its Community Rating System—where did we see that term used before? Oh, yeah … Obamacare!—that calculates rates based on how well local government implements flood mitigation policies. But without market input, we have federal mandates. This results in the endless cycle of flood destruction and rebuilding the NFIP oversees.

The NFIP is set to expire Sept. 30. Because of Hurricane Harvey, fiscal conservatives who want to reform it will probably extend it for a few months. It is time we had one of those national conversations we seem to need so many of about NFIP instead of blowing partisan smoke about zoning and global warming.