WASHINGTON – Even before Hurricane Harvey and Hurricane Irma drenched Texas and Florida, the nation’s federal flood insurance program was drowning in debt.
Now, unless Congress votes to extend the program by Dec. 8, homeowners throughout the country — including in Ohio — face uncertainty, with no new policies issued until it’s extended. That could send real estate into a tailspin, as homeowners in flood zones are required to buy the insurance in order to receive a federally backed loan.
"The program was designed to be dysfunctional," said Diane Katz of the conservative Heritage Foundation. "Right from the start it was going to be a loser, because if you don’t have people paying for the risk that they face, then they’re going to take more risk, and when they do, it’s going to cost taxpayers more."
The National Flood Insurance Program, established in 1968 in the aftermath of Hurricane Betsy and other disasters, was created because flood insurance was too costly, and insurers were fleeing the market. But nearly 50 years later, the program itself is unsustainable - nearly $25 billion in the hole even before this year’s hurricanes.
The problem is this, critics say: Only those in areas at high risk of flooding are required to get the federal policies, and those that do buy them often get policies often subsidized by the taxpayer. The very premise of the program, they say, encourages people — sometimes very wealthy people — to build waterfront homes at high risk of flooding by not making them pay the true price of the high risk they face.
And the pool itself is full of risk, because those at lower risk of flooding largely avoid buying the product. A report by the Pew Charitable Trusts found that as of 2016, 14,000 properties in Florida had repeatedly flooded, only to be bailed out, time and again, by federal flood insurance.
Congress extended the flood insurance program in early September as part of a short-term deal that also covered the federal budget and the debt ceiling, extending the program’s authorization through Dec. 8. But by the time that program expires, analysts say, Congress will have maxed out the $30.4 billion debt limit that the program now has.
"We don’t want taxpayers to subsidize people living in areas that are flood prone," said Sen. Sherrod Brown, D-Ohio, who advocates better mapping to truly reflect the flood zone. "But we have to do that without jacking up people’s rates and making it unaffordable. It’s a tough line to walk."
He said while everyone is interested in helping those who have suffered from a "terrible tragedy," "we shouldn’t subsidize other parts of the country so people can live in nice beachfront homes."
Areas that rely on flood insurance say they need the product to survive.
"Where we’re from in south Louisiana it’s just too important for us economically," said Caitlin Berni, vice president of policy and communications for Greater New Orleans Inc., a regional economic development organization for that city. "We need affordable flood insurance."
She argues that the current program’s problems can be explained in one word: Katrina. In the aftermath of that storm and other 2005 hurricanes, the government had to borrow $17.5 billion to settle the claims.
But that flooding, she said, was caused by the failure of the city’s levee system — not because of the hurricane.
Federal flood insurance, she said, "was never designed to insure against the failure of federal infrastructure."
While the program largely overwhelmingly benefits the Gulf States of Florida, Texas and Louisiana, Ohio had 34,328 flood policies in force statewide as of June 30, with most of those policies – 1318 – in the unincorporated parts of Ottawa County, which sits just off of Lake Erie.
Franklin County’s unincorporated sections had 750 policies, while Columbus had 995. While Toledo and unincorporated Lucas County had 747 and 726 respectively, Cleveland, on the banks of Lake Erie, only had 170 policies.
Canton, meanwhile, had 40 policies. Unincorporated parts of Stark County had 350.
In all, Ohio’s policies insured about $6.3 billion worth of loss – far less than Florida’s, worth about $423 billion, Louisiana’s, worth nearly $125 billion and Texas’, worth $161 billion.
According to Pew Charitable Trusts, Florida’s policies account for about 35 percent of the National Flood Insurance Policies that exist. Texas accounts for 12 percent while Louisiana accounts for 10 percent.
Meanwhile, the vast majority of U.S. homeowners go without: According to a 2016 poll by the Insurance Information Institute, only 12 percent of U.S. homeowners have a flood insurance policy. In the Midwest, only eight percent of homeowners do.
Critics say that a better-designed flood insurance program charge appropriately for those at risk, would prioritize subsidies toward the poor, who likely need help with flood damage more than the wealthy; would encourage people to build in ways that take into account the flood zones and would encourage private insurance to help meet the need.
In some ways, they say, the program rewards foolhardiness: If you know your property is in an area at high risk for floods, they say, the very least you can do is build in a way that take that into account.
"We keep rebuilding the same stuff in the same places in the same ways," said Ethan Handelman, vice president of policy and advocacy for the National Housing Conference. "We’re not mitigating, not preparing for risks we know are coming."
Those who do have the insurance tend to do better: During the Baton Rouge floods of 2016, the average homeowner with flood insurance received $86,500. The average homeowner without flood insurance received $9,100 in federal disaster assistance, according to Steve Ellis, vice president of Taxpayers for Common Sense.
"If you do flood and you don’t have flood insurance, you’re in a really bad way," Ellis said.