Monday, July 17, 2017 1:00 am
Debt wave hits flood insurance
$25 billion loss; no easy answer
PEQUANNOCK, N.J. – Time after time, as the river has risen and the water has crept up Roosevelt Street, Leni-anne Shuchter has fled the home she bought more than four decades ago.
There was the night in 1984 when rescuers plucked her from a neighbor’s roof as floodwaters engulfed her house. And the months in 2011 when she and her husband, John Van Seters, lived in a hotel after torrential rains from Hurricane Irene forced them to gut walls and floors and replace nearly everything they owned.
In between, other storms have forced her to file claim after claim with the troubled National Flood Insurance Program so she could rebuild. Yet the small home remains as vulnerable as ever, a reality reflected by its falling value in recent years.
“If I had a choice, I would sell,” said the 65-year-old Shuchter, who dreams of retiring to Arizona or Nevada. “I don’t need to deal with this anymore. (But) the reality of selling is nil.”
The house is what the federal government defines as a “severe repetitive loss property” – one of many that have been covered over and over again by taxpayers, the cumulative payouts often far more what the structures are worth. Nationwide, 11,000 such properties dot coastal zones or other low-lying areas, and their numbers continue to grow, in part because of the effects of climate change and ongoing development.
One house outside Baton Rouge, Louisiana, valued at $55,921, has flooded 40 times over the years, amassing $428,379 in claims. A $90,000 property near the Mississippi River north of St. Louis has flooded 34 times, racking up claims of more than $608,000. And an oft-flooded Houston home has received more than $1 million in payouts – nearly 15 times its assessed value of $72,400. The data is collected by the Federal Emergency Management Agency, which oversees the insurance program.
The extreme cases are only a fraction of the NFIP’s 5 million active policies, but they historically have accounted for about 30 percent of its claims. And while they’re a financial albatross for taxpayers, the claims are hardly the program’s only challenge.
The NFIP, which must be reauthorized by the end of September, is nearly $25 billion in the red – a debt that administrator Roy Wright says he sees no way to pay back.
“Only Congress can deal with that past loss,” Wright said last week. “What we’re focused on today is ensuring that going forward, we’re putting ourselves on a sound financial footing.”
On Capitol Hill, lawmakers are scrambling to overhaul the half-century-old program. Allowing it to lapse Sept. 30 would risk disrupting the buying and selling of homes in flood-prone areas across the country.
The NFIP has long enjoyed bipartisan support, if for one simple reason. “Where it rains, it can flood, so no one in the country is insulated,” said Laura Lightbody, who directs an initiative at the Pew Charitable Trusts aimed at helping communities prepare for floods risks.
Critics have long maintained that although the NFIP was intended to encourage smarter development, its current design too often bails out people in flood-prone areas. In short, it incentivizes staying put, whatever the cost, rather than moving to higher ground.
Plus it has had only limited success in discouraging development in questionable areas.
Figuring out how to tackle the program’s problems remains complicated and politically fraught.