For Many in Houston Without Flood Insurance, SBA Loans Offer a Lifeline

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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 low-priced federally supported insurance. Of these policies, approximately 68 percent were on single-family homes and 21 percent on condo units. Since 2012, the number of properties covered under the flood insurance program has dropped 10 percent, from almost 5.5 million to about 4.9 million.

Houston's problem was runaway development in flood-prone areas, accelerated by heavily subsidized federal flood insurance....

In 1942, Gilbert White, the nation's leading expert on disaster relief and an outspoken critic of the government's approach to flood control, lambasted national flood policy as "essentially one of protecting the occupants of floodplains against floods, of aiding them when they suffer flood losses, and of encouraging more intensive use of floodplains".

Extensive flood damage can lead to financial ruin for the uninsured.

The result of this insurance gap is people scrambling for help.

However, 43 percent of homeowners incorrectly believe that their homeowners' insurance covers them for flood losses. It also promotes the destruction of wetlands that could reduce flooding.

What does flood insurance cover?

The folly of the government's flood insurance program has been evident for decades, and some Midwestern communities have been in on the action.

With a National Flood Insurance Program policy, a homeowner can purchase coverage on a dwelling up to US$250,000 and the contents of a home up to $100,000. Although not the best measure of the replacement cost, the median price of new homes sold in the U.S.

Why is the National Flood Insurance Program underwater? The premiums to cover the cost of insuring such property are rather high. "If you've lost your home and you don't have insurance, that's a good time to walk away from your property", said R.J. Lehmann, an insurance expert at the R Street Institute, a libertarian research organization in Washington.

The administration is known for handling business loans, but homeowners seeking relief can also borrow up to $200,000 for repairs to real estate, and renters can receive up to $40,000.

As the floodwaters of Hurricanes Harvey and Irma recede, they may reveal more than moldy drywall and fetid trash. The Harvey response alone eventually could double the $136 billion in government aid spent after Hurricane Katrina flooded New Orleans...

The average claim in the past 12 years has been for about $50,000, which means this storm could quickly deplete what little the cash the program has.

But the case against subsidized flood insurance is not a case against growth; it is a case against distorted growth. But making flood insurance actuarial - making it pay for itself - would be a major step forward.

Nor do many Florida residents who don't live along the coast, where flood insurance is mandatory.

What can be done to fix the program? However, an outcry from homeowners in high-risk areas such as coastal Florida led to the Homeowners Flood Insurance Affordability Act, passed in 2014, that limited or rescinded numerous Biggert-Waters rate increases. It is to help them rebuild. While there may be some truth to this, likewise, homeowners rebuild in high risk areas time after time. His total insurance premiums since buying the house in 1975: $6,000.

With the likelihood of much more flooding in the coming weeks and years, more needs to be done to mitigate the risk, including producing more accurate and timely maps of the flood risk in various areas, especially high-risk areas, educating people about what those risks really mean and helping relocate homeowners as necessary.

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