Flood insurance reform
Abandoned vehicles along heavily-flooded Route 13 on the Eastern Shore of Maryland. More than 7 inches of rain fell in the Washington, DC area throughout the night causing flooding, damaged power lines and closing of highways and railroads June 25, 2006.
TESS VIGELAND: Flooding shut down the IRS and the Justice Department buildings today. An appropriate sign that they were on the mark with another hearing on Capitol Hill . . . this one on flood insurance. In the wake of Hurricane Katrina, there's a growing consensus the program must be reformed so taxpayers don't get soaked. Marketplace's Scott Tong reports.
SCOTT TONG: The federal flood insurance program is meant to pay for itself. Homeowners in dangerous areas have to buy the insurance and those premiums fund the claims. Well, after Katrina the math went terribly wrong. Last year the program took in $2 billion and paid out $25 billion.
DAVID CONRAD: Fundamentally the flood insurance program is bankrupt.
David Conrad studies water resources for the National Wildlife Federation.
CONRAD: Its revenues are far below what its costs are. It's the taxpayers that are going to have to bail it out.
Today's bill in the House would hike premiums as much as 30 percent a year. Historically, the program has given owners of older homes a subsidy. They pay less than half of what they otherwise would. And some owners are doing pretty well.
Larry Larson runs a group of flood plain experts.
LARRY LARSON: you have to ask yourself, Why would we subsidize second homes? These are vacation homes, essentially commercial properties.
Higher premiums are also meant to change behavior. If it hurts financially to live by the water, perhaps it's time to move. That could disrupt some housing markets, but Robert Hunter says that's the idea. He used to run the flood insurance program.
ROBERT HUNTER: If upheaval in development means we can't build in unsafe places because they shouldn't be built there in the first place, that's good.
A companion bill in the Senate requires more people to buy flood insurance, including those who live by levees. Here's Democratic Congressman Earl Blumenauer.
REP. EARL BLUMENAUER: The saying goes, There are only two kinds of levee. Those that fail and those that will fail.
In Washington, I'm Scott Tong for Marketplace.