Rich America's Day of Reckoning

There's something about waterfront property. The allure of living at the water's edge is powerful and it has been reflected in sky-high property prices. That may be about to change.

Private insurers stopped writing flood and hurricane policies for homeowners years ago. That's when those socialism-hating folks began howling lie cut cats and the folks on Capitol Hill heard them, loud and clear. If the private sector wouldn't deliver, Congress would give the job to FEMA, the Federal Emergency Management Agency. 

The best part is that FEMA kept its premiums low, low, low for those in the high, high, high income brackets. Socialism for the rich. John Kenneth Galbraith was right when he said that's the only sort of socialism acceptable in the US. Yeah, well, it had a good run.

8 million Americans moved to counties along the U.S. coast between 2000 and 2017, lured by the sun, the sea and heavily subsidized government flood insurance that made the cost of protecting their homes much less expensive, despite the risk of living in a flood zone near a vast body of water.

But a reckoning is coming.

On Friday, the Federal Emergency Management Agency will incorporate climate risk into the cost of flood insurance for the first time, dramatically increasing the price for some new home buyers. Next April, most current policyholders will see their premiums go up and continue to rise by 18 percent per year for the next 20 years.

18 per cent a year for 20 years, that's a lot of percents, eh? I think that's for starters. As seas rise and coastal storm events increase in frequency, intensity and duration, 18 per cent per year might not be nearly enough.

My guess is this isn't about fixing up flood damaged houses. It's about giving those special people a means to cash out on the public dime when it's finally time to bid adieu to that cliff top mansion on the coast.

Then there's Congress where senators and representatives alike get nervous when the donor class is riled up.

Homeland Security Secretary Alejandro Mayorkas said in April that Risk Rating 2.0 “aligns with the Biden administration’s priority to … tackle the effects of climate change and eliminate inequities in the delivery of federal programs.”

But it’s unclear how long Risk Rating 2.0 will survive. Wealthy policyholders in coastal states are complaining, and members of the House and Senate are listening.

Thirty-eight members signed a letter in September expressing their concern over “the burden of potential double digit rate hikes on our constituents” and asked for a delay. Congress can pass legislation that could derail the price increase. (Only three of the signees represent landlocked states.)

Congress has increased flood insurance rates before, in 2012. But it reversed those increases two years later after some communities protested.