How the Government Turns Natural Disasters Into Catastrophes

Many of the most expensive flood and storm disasters in US history have occurred in recent decades. The glib response is to blame the severity of these catastrophes on climate change, but are we looking in the wrong direction?

Almost 20 years ago, the National Wildlife Federation issued a report on this subject, Higher Ground. It argued, among other things, that federal flood insurance was amplifying the impact of storms by encouraging Americans to build and rebuild in areas prone to flooding.

Higher Ground revealed a home in Houston that was valued at $114,480, but which had been flooded 16 times and thus received $806,591 in federally subsidized flood insurance payments.

Michael Grunwald, writing in Politico, sums up the issue:

Houston’s problem was runaway development in flood-prone areas, accelerated by heavily subsidized federal flood insurance.… Congress often discusses fixing flood insurance to stop encouraging Americans to build in harm’s way, but the National Flood Insurance Program is still almost as dysfunctional as it was 19 years ago. It is now nearly $25 billion in the red, piling debt onto the national credit card. Meanwhile, cities like Houston – as well as New Orleans, which Higher Ground identified as the national leader in repetitive losses eight years before Hurricane Katrina – continue to sprawl into their vulnerable floodplains, aided by the availability of inexpensive federally supported insurance.

Distorted Growth

Those who advocate for insurance subsidies might say that every great city was once small and population growth requires building. The same subsidies advocate might say that to take a position against subsidies is to prevent growth and push people into rural areas where they prefer not to live.

But the case against subsidized flood insurance is not a case against growth; it is a case against distorted growth. Federally supported insurance overrides the risk-reducing incentives that insurance premiums provide and results in building in vulnerable areas. For example, wetlands are lost to distorted growth.  From 1992 to 2010, Northwest Houston lost more than 70% of its wetlands.

Grunwald is clear that it is subsidized flood insurance, not climate change, that is responsible for Houston’s disaster:

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