The American dream includes owning one’s own home. For many in New Mexico, those homes are in or near the mountains. In coastal states, it’s often beach-front property — where folks such as Cindy Armour can be lulled to sleep by the sound of waves washing ashore and awaken to the cries of gulls.
According to a USA Today report, Armour is one of many property owners on Dauphin Island, Ala., who rebuilt homes damaged or destroyed by Hurricane Katrina in 2005. Armour first bought her home in 2004, five months before Hurricane Ivan swept over the island at the mouth of Mobile Bay and blew it away. So, like anyone who doesn’t want to see their dream die, Armour began rebuilding. The second home wasn’t even finished when Katrina tore into it. She rebuilt again, moving in earlier this month. She says if another storm takes her home, she’ll finally throw in the towel.
How can Armour and others like her afford to rebuild time and again? Because the taxpayers are subsidizing their dreams. Under a federal program begun in 1968, homeowners can purchase flood insurance for a little more than $700 for every $100,000 of property coverage. The policies also provide coverage for $30,000 worth of contents. USA Today reports that without taxpayer subsidies, the rates would be about 46 percent higher. Even with taxpayer help, premiums don’t cover the losses.
The program takes in somewhere in the neighborhood of $2 billion in premiums each year. If that doesn’t cover what the program must pay out in claims, it borrows from the government. That borrowing has topped $17 billion for Katrina claims alone. Since the program takes in only $2 billion a year, and hurricanes and other flooding events such as those we’re seeing in the Midwest and Texas happen pretty much every year, how will the program repay the money it has borrowed? Our guess is those “loans” will simply be written off and the taxpayers will take the loss.
Those with a vested interest understandably defend subsidized flood insurance and other taxpayer-funded expenditures that make their way of life possible in flood-prone areas. Harry Simmons, mayor of Caswell Beach, N.C., and president of the American Shore and Beach Preservation Association, says federal subsidies of coastal areas is important because “beaches are the No. 1 tourist destination in the U.S.” Protecting this commercial resource is a legitimate use of tax money, he says.
Even if one accepts the premise that private economic interests should be supported with tax dollars — which we don’t — there are better ways to do it than continually rebuilding luxury homes at the water’s edge. Perhaps beach-front development should be limited to commercial properties that cater to tourists. Such buildings could be constructed to either withstand hurricanes or built to be destroyed and rebuilt cheaply. Homes would be constructed in areas with less exposure to flooding and other storm damage. That wouldn’t completely solve the problem, but it could limit the bills for which taxpayers are on the hook.
It’s not like the feds aren’t trying. Despite resistance from developers and local politicians, there are proposals before Congress to eliminate flood-insurance subsidies and limit payouts on individual properties. But since it’s been a couple of years since Hurricanes Katrina and Rita pushed awareness of the costs of rebuilding to the forefront, many Americans aren’t paying attention to the Gulf Coast’s problems, removing the pressure for the feds to fix the system.
New building guidelines from the Federal Emergency Management Agency require houses to be built higher and safer. Gulfport, Miss., hard hit by Katrina, has adopted some of FEMA’s guidelines, requiring homeowners with at least 50 percent damage to rebuild using FEMA codes to qualify for flood insurance. The nearby cities of Biloxi and New Orleans are hedging, though, to give homeowners more flexibility. They’re allowing homeowners to skirt the 50-percent rule. Although such practices might seem like kindness, by allowing homes to be rebuilt more quickly, they’ll end up costing homeowners and taxpayers alike when the next flood comes along.
If people in flood-prone areas want to risk their property with each storm, that’s their choice and it should be their responsibility. The rest of us shouldn’t have to pick up the tab.