Flood Insurance Is Socialism, and Not in a Good Way

Andrew Revkin of The New York Times, on PBS the other day talking about floods in Texas, spoke of our propensity for building stuff in areas at high risk for flooding, which he attributed in part to an emphasis on property rights in Texas culture. I’m not going to say that isn’t true, but it’s far from the whole story. The more complete picture, which is national, is hardly a testament to anybody’s rugged individualism in any state of the union. All of us — rich people who own second-homes and regular people whose houses or businesses are in flood plains — are total socialists when it comes to flood insurance.

If we were to get all red-blooded property-rights-ish about it, then, sure, any red-blooded American ought to be able to build a house wherever he wants. Let’s say it’s a second home on Galveston Island or a working class house in West Dallas. Like the rugged individualists we are, we should all then head out into the economy and pay some kind of market rate for flood insurance.

If there is pretty good scientific data to show that our house will be wiped out by a flood about once every 20 years, then the insurance company will want a rate from us that reflects their cost of building it back for us, plus a profit for them, because business.

But nobody whose property is at risk of flooding wants to pay those rates. Many of us can’t. So we don’t. Instead we buy federal government “insurance” from the National Flood Insurance Program, which, according to FEMA officials who run it, is now $23 billion in debt.

Why does the program run at such a huge debt? Because it’s not really insurance. It’s welfare. If it were insurance and operated according to anything like actuarial principles, the program would charge us premiums somewhere in the neighborhood of 10 times the current rates.

That’s about where rates were headed a few years ago after an overwhelming bipartisan majority of Congress passed the Biggert-Waters Act to reform, bail out and save national flood insurance. When people got hints of the new rates, they went completely nuts. A New York Times piece two years ago quoted a guy saying the new rates would put him out of his home.

“I could live with $1,500,” he said. “But $9,000, $15,000? There is no way on God’s green earth I can pay that.”

He wasn’t a rich guy with a second home. This was a firefighter in the borough of Queens in New York City.

Almost from the moment Biggert-Waters passed Congress, property-owners all over America went to war, hoping to get the act reversed or, failing that, chisel away at the rate provisions. The act hasn’t been reversed, but it has been deeply chiseled, with the result that the National Insurance Program continues to accrue enormous debt — debt that will no doubt get bigger and deeper when this flooding event we’re having in Texas right now starts ringing up on government cash registers.

Look, I’m sort of a socialist myself about things, and when I see people totally devastated by natural disaster my heart aches for them. As a local news reporter all my life, I’ve probably seen more people killed and economically injured by floods than any other cause. But I also worry that a combination of human factors causes us to keep putting people in the way of the same harm, never learning from the last tragedy.

As we have seen in Texas in recent weeks, some victims don’t just lose money. They lose their own lives or the lives of loved ones.

But one big reason we never learn from the last one, no matter how horrific, is that for some strange reason we can’t remember it. I saw a guy on TV in the Hill Country last  week looking down from a bluff on the white bones of a house swept off its concrete slab the day before by flood waters. He told the interviewer that this was the first time anything like this had ever happened.

Maybe to him. In 1978 I stood on a bluff — not on that same spot he was on but nearby in the Hill Country in the same kind of terrain — looking down on white slabs where homes had been a day before. In 1978 I was young. There was a really old guy standing next to me, a local who probably wasn’t as old then as I am now. He said, “I saw this same thing in this same spot 20 years ago.”

The truth is that we do this in a never-ending cycle — build in the path of harm, suffer disaster, gather in money paid by national flood insurance and other state and federal subsidies, and build again in the same path of the same harm and forget what happened the last time.
Several years ago in some reporting I was doing on the Trinity River project in Dallas, a flood safety expert at U.S. Army Corps of Engineers headquarters in Washington told me that the only real flood control policy is a strong land use policy. It’s a conclusion not far off from findings of the 1994 “Galloway Report,” the work of a national task force convened to assemble and analyze global wisdom on flood control.

It comes to this: Every little chance you get, get out of the way. Don’t build in the path of floods. Don’t believe that new levees, dams and dikes will protect you.

When a new levee is built, the land it supposedly protects gets covered with concrete in the blink of an eye; run-off increases exponentially; the water the new levee was supposed to contain swells in volume; all of a sudden we’re in even worse shape than before. Now we have way more property and people in the path of way more water.

The Corps of Engineers expert I spoke with told me Western Europe handles this problem with tough land-use restrictions. They just don’t let you do it. Of course, they also have a good thousand years of data to go on, whereas our flood data in this country tends to be based on the thinnest veneer of historical experience.

He and I laughed about it. Fat chance, we agreed, that Americans would ever agree to tough national land-use policies. Our culture is rooted deep in a view of land as an inexhaustible and disposable resource that we have every right to pillage however we see fit and can afford.

But ever since I heard Revkin, The New York Times guy, citing the Texas tradition of reverence for property rights, I have been thinking about the role of politics and personal principle in flood control. In fact, let’s go back and revisit that rugged individualism thing.

We don’t really need strong prohibitive land use controls if we simply take our individualism back to a more honest formulation. What if we said we’re all a bunch of rugged individualists, and we’re going to build where we damn well want to, and then we’re going to take care of our own damn insurance needs without a bunch of damn nanny-state interference. In other words, we will pay the market freight. Ourselves.

If people just had to pay a market rate for flood insurance, we’d see a revolution in land use, because we would see a whole hell of a lot less stuff getting built in places where flood insurance rates are prohibitive. Otherwise known as places everybody knows are going to flood.

Want to build where it floods? Pay the freight, man. Don’t ask me to pay it for you.

If people suddenly had to pay market rates for flood insurance, the entire culture of the real estate industry would have to change. For instance, in recent weeks I have been looking at something called the “inundation easements” downstream from major reservoirs in the Dallas area. Those are areas the Corps of Engineers has a right to flood in order to protect the reservoir. The easements are described usually in elevation above sea level: the Corps can flood to that level. But when I compare those easements with topographical maps, I can see how far the easements spread.

Then when I compare that view with Google Earth, I can see how many houses lie within the area of that easement. Below Lake Ray Roberts 40 miles north of Dallas, for example, entire new subdivisions lie within the inundation easement.

Did that come up at the closing? Does all of the title insurance on that property disclose the inundation easements, and, even if it does, how many homeowners in that area have ever heard of an inundation easement? All of those things would become much more important and much more visible if tough flood insurance rates made the market more sensitive to flooding.

The rate of red ink incurred in every crisis by the National Flood Insurance program means it is paying settlements out of cash, the huge infusions of tax money the Congress has to turn over to it every year to keep it from going belly-up. So those settlements are being paid directly by the tax-payers, rather than from revenues.

Why would we do that? Why would we continue to fund a pattern of land-use that serves only to seduce people back into harm’s way? How do we benefit from that as a society? Why can’t we just remember?