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Reasonable and Risk‐Based? Replacing NFIP Generally Subsidized Rates with a Means‐Tested Subsidy

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  • Benjamin Miller
  • Lloyd Dixon
  • Noreen Clancy

Abstract

The National Flood Insurance Program was created to seek two often conflicting goals: (i) shifting risks from federal taxpayers to those who choose to live in flood plains and (ii) ensuring flood insurance is available to everyone at “reasonable” rates. Efforts to accomplish the second goal currently take the form of subsidies based on location and the date a home was constructed. The resulting revenue from subsidized insurance premiums is not sufficient to cover the true cost of flood insurance, and federal taxpayers have paid the difference: $30 billion to date. Based on a detailed survey of households in the high‐risk flood zones of New York City (NYC), we find that replacing existing premium subsidies with risk‐based prices and a subsidy for low‐income housing‐burdened households could better meet both goals by ensuring low‐income individuals have access to affordable flood insurance while still saving the federal taxpayer up to $183 million per year in NYC alone.

Suggested Citation

  • Benjamin Miller & Lloyd Dixon & Noreen Clancy, 2019. "Reasonable and Risk‐Based? Replacing NFIP Generally Subsidized Rates with a Means‐Tested Subsidy," Southern Economic Journal, John Wiley & Sons, vol. 85(4), pages 1180-1195, April.
    • Handle: RePEc:wly:soecon:v:85:y:2019:i:4:p:1180-1195
    DOI: 10.1002/soej.12329
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    Cited by:

    1. Mahkameh Zarekarizi & Vivek Srikrishnan & Klaus Keller, 2020. "Neglecting Uncertainties Biases House-Elevation Decisions to Manage Riverine Flood Risks," Papers 2001.06457, arXiv.org, revised Sep 2020.

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