How well can FEMA’s existing flood insurance and grant programs protect Americans under climate change?

Background 

Climate change is now impacting Americans’ daily lives, and floods, in particular, are a pressing issue. Under the threat of climate change, hurricanes have caused above-average flooding in the last four years.[1] Coastal cities such as Miami, New Orleans, and Honolulu are facing great coastal erosion and more frequent “now-rare flood events” due to the sea-level rise.[2] Recognizing these inconvenient truths, so far the Biden Administration has announced about $5 billion of additional funding for Federal Emergency Management Agency (FEMA) to prepare Americans for the upcoming climate challenges.[3] On October 28th 2021, FEMA announced two new initiatives: a Climate Adaptation Enterprise Steering Group and a process for involving stakeholders in the development of FEMA’s 2022-2026 Strategic Plan.[4] As more money pours into FEMA and new policies are launched, the multiple long-standing flood mitigation programs that FEMA runs deserve careful review.

Two administrative tools: insurance and grants 

For decades, FEMA has used two main administrative tools: insurance and grants. Both tools were invented long before the era of climate change. How can these tools complement each other under climate change? This post analyzes these tools from an administrative perspective, specifically looking at three aspects: effectiveness, efficiency, and equity.[5]

Insurance Programs 

           The National Flood Insurance Program (“NFIP”) is a flood insurance program administered by FEMA according to the National Flood Insurance Act of 1968.[6] FEMA’s prime goals for the insurance program are to reduce property owners’ economic burdens when floods occur and to decrease reliance on disaster funds.[7] The insurance covers not only the structures damaged in floods but also the personal belongings within the structures.[8] Homeowners, business owners, or renters can buy the insurance to have peace of mind whenever a flood occurs.[9] The insurance rate is calculated based on the flood maps that FEMA generates.[10]

Through the program, NFIP has protected people living in flood zones from financial loss, which demonstrates effectiveness. However, because the insurance premium is underpriced, the government is implying that people are invited to stay in high-risk flood zones, which is not effective in the long term in reducing the impact of flooding.[11] From the efficiency aspect, flood insurance is not a low-cost program. By August 2020, the insurance program was $20.5 billion in debt.[12] Besides the premium not reflecting the risk of loss, the government still pays for the disasters’ loss regardless of whether the properties are insured if these people apply for compensation after a flood occurs. From the equity aspect, if not carefully designed, insurance is likely to compensate those suffering from repetitive floods. In addition, those who benefit tend to be wealthier because the premiums are expensive; those who cannot afford it are not eligible for compensation. This is especially problematic because marginalized people tend to live in high-risk zones.[13]

           Grants 

           Currently, two main FEMA grants help communities build pre-disaster projects: Flood Mitigation Assistance (FMA) and Building Resilient Infrastructure and Communities (BRIC). The major differences between these two are their funding sources and the types of hazards they cover.

FMA was established through the authorization by Section 1366 of the National Flood Insurance Act of 1968.[14] Its main goal is to reduce flood insurance claims, particularly for structures with repetitive floods – sometimes called Severe Repetitive Loss and Repetitive Loss Properties.[15] BRIC is a new grant that was just initiated in 2020 after Congress passed the amendment of Section 203 of the Stafford Act’s amendment in 2018.[16] The grant is funded from a set-aside of six percent of the federal post-disaster grants each year after major disaster declarations, which ensures that funding is sustainable. [17] It funds disaster mitigation projects related to various hazards, including wildfires and earthquakes.[18] Capability and capacity building activities are also eligible for the grant.

BRIC grants have a specific goal of flood mitigation and satisfy this goal through the mitigation projects and building activities. From the efficiency aspect, besides the costs, one big issue is the lengthy bureaucratic chain from FEMA to states (applicants) and local governments (sub-applicants) and then to the homeowners; it generally takes at least a year for a homeowner to get the funding being awarded.[19] Moreover, with multiple funding and regulations for almost the same purpose of flood mitigation, it is inefficient for homeowners as they have to apply for each grant separately. Also, note that BRIC reviews all kinds of hazard mitigation, while FMA focuses on floods. From the equity aspect, marginalized communities cannot file for grants as easily and thus have a reduced chance of getting funded.

Effective, Efficient, and Equity: Key challenges ahead for Congress and FEMA

Comparing the two tools from a big picture perspective, Congress and FEMA should address the following overall challenges and considerations moving forward.

Grants seem to be more effective than insurance as the grants address flood mitigation directly. Buying underpriced flood insurance is essentially inviting people to stay in high-risk zones. It is crucial to for the cost of insurance to reflect the risk of loss. FEMA recently updated their rating system – to the Risk Rating 2.0 – so the effectiveness of this updated system will require further observation.[20]

As for efficiency, the insurance program is costly and deeply in deficit, while grants are notoriously time-consuming. Both clearly need a change. FEMA should address these issues now that FEMA is soliciting public comments on NFIP reform,[21]. FEMA could, for example, quickly establish a grant program that focuses solely on flood mitigation with standardized application requirements to increase efficiency.[22]

As for equity, both tools need to give special attention to marginalized groups residing in high-risk flood zones.[23] The new insurance pricing mechanism Risk Rating 2.0 aims to not only reflect the real flood risks but also make insurance more affordable.[24] Moreover, both grant programs were selected in the Justice40 White House justice programs, which dictate that 40 percent of federal investments must flow to disadvantaged communities.[25] In addition, FEMA is providing more technical assistance throughout the application process.[26] However, improving equity is a continuous process and agencies must be held accountable along the way. While elected officials also play a role, holding the officials accountable with regard to both insurance and grants is challenging due to the lapse in time between the time the government puts them into effect and the time a disaster occurs.

           Conclusion 

While fighting floods is nothing new, fighting under climate change requires a more proactive and comprehensive approach. Reflecting on the real flood risks on the ground, streamlining the processes and building equity are the keys to helping Americans better prepare for the future.

 

[1] Why Buy Flood Insurance, National Flood Insurance Program, https://www.floodsmart.gov/why-buy-flood-insurance (last visited Nov. 14, 2021).

[2] Oliver Milman, US to have major floods on daily basis unless sea-level rise is curbed – study, The Guardian, (Apr. 16, 2020, 4:00 pm), https://www.theguardian.com/environment/2020/apr/16/us-climate-change-floods-sea-level-rise.

[3] FACT SHEET: Biden Administration Announces Nearly $5 Billion in Resilience Funding to Help Communities Prepare for Extreme Weather and Climate-Related Disasters, The White House (Aug. 09, 2021), https://www.whitehouse.gov/briefing-room/statements-releases/2021/08/09/fact-sheet-biden-administration-announces-nearly-5-billion-in-resilience-funding-to-help-communities-prepare-for-extreme-weather-and-climate-related-disasters/.

[4] FEMA Announces Initial Initiatives to Advance Climate Change Resilience, FEMA (Oct. 28, 2021), https://www.fema.gov/press-release/20211028/fema-announces-initial-initiatives-advance-climate-change-resilience.

[5] These three aspects are derived from The tools of government: A guide to the new governance (Lester M. Salamon ed., 2002).

[6] National Flood Insurance Act of 1968, 42 USCA §4001 et seq.

[7] Flood insurance, FEMA, https://www.fema.gov/flood-insurance (last visited Nov. 16, 2021).

[8] What flood insurance covers, National Flood Insurance Program, https://www.floodsmart.gov/whats-covered (last visited Nov. 16, 2021).

[9]Why buy flood insurance, FEMA, https://www.floodsmart.gov/flood-insurance/why (last visited Nov. 16, 2021).

[10] What is a flood map, FEMA, https://www.floodsmart.gov/all-about-flood-maps (last visited Nov. 16, 2021).

[11] Ron J. Feldman, The tools of government: A guide to the new governance 186, 211 (Lester M. Salamon ed., 2002).

[12] Lindsey Jacobson, 2020 hurricane season is busiest ever recorded, and National Flood Insurance Program faces over $20 billion debt, CNBC (Nov. 18 2020 2:14PM), https://www.cnbc.com/2020/11/18/flood-insurance-program-20-billion-in-debt-amid-busy-hurricane-season.html.

[13] Andrea Riquier, National Flood Insurance Program leaves out communities of color, lower-income Americans, report finds, MarketWatch (Aug. 6, 2021), https://www.marketwatch.com/story/national-flood-insurance-program-leaves-out-communities-of-color-lower-income-americans-report-finds-11628093167.

[14] National Flood Insurance Act of 1968, 42 USCA §1366.

[15] Flood Mitigation Assistance FY 2020 Subapplication Status, FEMA, https://www.fema.gov/grants/mitigation/floods/fy2020-subapplication-status (last visited Nov. 16, 2021).

[16] Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 USC §5133.

[17] Hazard Mitigation Assistance: Building Resilient Infrastructure and Communities, Federal Register (Apr. 10, 2020), https://www.federalregister.gov/documents/2020/04/10/2020-07609/hazard-mitigation-assistance-building-resilient-infrastructure-and-communities.

[18] It is a competitive grant and 22 projects were selected in fiscal year 2020. In total, FEMA funded around $500 million. See BRIC FY 2020 Subapplication Status, FEMA, https://www.fema.gov/grants/mitigation/building-resilient-infrastructure-communities/fy2020-subapplication-status (last visited Nov. 17, 2021).

[19] For instance, the FY2020 application period began on September 30, 2020, but the actual distribution of awards only started in late November 2021.

[20] Risk Rating 2.0: Equity in Action, FEMA, https://www.fema.gov/flood-insurance/risk-rating (last visited Nov. 17 2021).

[21] FEMA, Request for Information on the National Flood Insurance Program’s Floodplain Management Standards for Land Management and Use, and an Assessment of the Program’s Impact on Threatened and Endangered Species and Their Habitats, Federal Register (Oct. 12, 2021), https://www.federalregister.gov/documents/2021/10/12/2021-22152/request-for-information-on-the-national-flood-insurance-programs-floodplain-management-standards-for.

[22] Disaster Resilience:

FEMA Should Take Additional Steps to Streamline Hazard Mitigation Grants and Assess Program Effects, Gov’t Accountability Office (Feb 02, 2021), https://www.gao.gov/products/gao-21-140.

[23] Research Shows more people living in floodplains, NASA, https://earthobservatory.nasa.gov/images/148866/research-shows-more-people-living-in-floodplains (last visited Nov. 17, 2021).

[24] See supra note 21.

[25] The Path to Achieving Justice40, The White House (July 20, 2021), https://www.whitehouse.gov/omb/briefing-room/2021/07/20/the-path-to-achieving-justice40/.

[26] Grant Management Technical Assistance Resources, FEMA, https://training.fema.gov/grantsmanagement/ (last visited Nov. 17, 2021).