Low flood insurance rates cost the taxpayer
Soon after Superstorm Sandy last year, Congress passed a law to make flood insurance rates better reflect the actual risks of building, and rebuilding, in the face of rising seas. But that effort to inject some reality into the flood insurance program also has receded.
In a rare flood of bipartisanship, members of both parties in both houses introduced a bill last week to delay by four years the rate increases that are supposed to take effect this year.
The federally subsidized program is supposed to funded primarily by premiums for flood insurance policies. About 5.5 million policyholders paid $3.6 billion in premiums last year as the program's debt increased to about $25 billion.
When the program doesn't have enough money to pay claims, which has become more frequent, it borrows the money from the Treasury. That means that all taxpayers are paying for low flood insurance rates.
Artificially low rates not only reward but encourage risky development in known flood zones, especially along the coasts.
Shocks from exponentially higher rates could hurt low-income coastal residents and real estate markets, thus the broader economy.
So, a delay might be warranted. But ultimately the federal subsidies should continue only where state and local governments aggressively mitigate the risk by limiting development in dangerous areas.