Coastal conservatives battle Republican leadership on flood insurance reform

Shortly after the House Financial Services Committee passed a slate of reforms to the National Flood Insurance Program over the summer — four of which passed unanimously — a couple dozen House Republicans suddenly bucked. In mid-July, 26 members signed a letter to House leadership to “respectfully express concerns with the current package of flood insurance bills that have recently passed the House Financial Services Committee.”

“We are concerned that the package will make flood insurance unaffordable for our constituents,” the members wrote, “will stall development and construction, and increase exposure to the Federal Treasury.”

The signatories opposing conservative reforms were an eclectic group, including veterans and rookies, conservatives and liberals, establishment types and bomb-throwers. The one pattern: Most of the members signing the letter represent a district touching the ocean or the Gulf of Mexico.

So, the fault line is this: Conservative members who are trying to reduce federal subsidies that encourage development in flood-prone areas are facing resistance from coastal Republicans fearing the impact of losing these subsidies.

“If you’re a conservative, you’re only a conservative until government subsidizes your constituents,” Rep. Sean Duffy, a champion of the reforms noted to the Washington Examiner, “and then, all conservatism goes out the window.”

The National Flood Insurance Program, established in 1968, offers insurance to homeowners and businesses at steeply-discounted rates based on risk assessments assigned to relevant properties by flood maps. Current reforms would open up the market to private competition, put the program on a path towards solvency, and work to end the federal government’s subsidization of dangerous properties, according to supporters.

House Financial Services Committee Chairman Jeb Hensarling, a leader in the efforts to implement private-market NFIP reform, cited several examples of apparent waste in the program in a September interview with the Washington Examiner. “There was a home in Houston that was worth about $115,000 that has now flooded 16 times, and NFIP has now paid $800,000 for that house,” he said. One $55,000 home in Baton Rouge, according to Hensarling, has flooded 40 times, costing NFIP $428,000. Another in St. Louis, worth roughly $90,000, has flooded 34 times to the tune of $608,000.

Hensarling outlined what he calls the “three flaws” of the NFIP: (1) It subsidizes and encourages people to live in harm’s way, (2) it’s a bankrupt program financed by a bankrupt nation, and (3) it protects a government monopoly. His reform efforts are aimed at addressing those concerns.

Duffy, also on Financial Services, recently toured devastation caused by Hurricane Harvey in Houston. He visited a low-income neighborhood where some homes had flooded multiple times in the past several years alone.

Because of the structure of the NFIP, Duffy explained, those properties will be rebuilt “in the same dangerous place that they were before Harvey.”

“If they don’t want to move they can stay, but we might make some decisions that we’re not going to keep them in the flood insurance program,” he said. “You can go get private insurance if you want to stay in your home or we’re going to move you to a safer location.”

Duffy’s and Hensarling’s views were the GOP consensus on the Financial Services committee this summer. Republicans were uniform in supporting most of these reforms. By midsummer, though, the geographic divide opened, and a measure that in June had unanimous support from both parties in committee was killed in the Senate September 28.

The background:

In late June, the House Financial Services Committee passed seven bills aimed at addressing flood insurance reform, several of which passed with overwhelming bipartisan support. The Flood Insurance Market Parity and Modernization Act cosponsored by Florida Representatives Republican Dennis Ross and Democratic Kathy Castor cleared the committee on a 58-0 vote.

House leaders folded the Ross-Castor bill into the September reauthorization of the FAA, which cleared the lower chamber 264-155, though without the support of seven Republicans, five of whom were from coastal states. The White House had declared it “strongly support[ed]” the inclusion of Ross-Castor in the FAA bill. “This provision is an important, bipartisan step toward increasing the private market for flood insurance,” the September 26 statement said.

It was then that the rift opened up publicly.

In the upper chamber, Louisiana’s two Republican Senators, Bill Cassidy and John Kennedy lobbied to pull Ross-Castor from the FAA bill. “To protect homeowners, flood insurance must be addressed whole piece not piecemeal,” Cassidy explained in a statement. “I and the Senate are committed to protecting homeowners which is why the amendment passed.”

One day earlier, a Politico reporter overheard Minority Leader Chuck Schumer, D-N.Y., “needl[ing]” Kennedy in an elevator not to back flood insurance reform in the FAA bill. “You can’t let us down on this! You have to talk to your leadership! It’ll kill us!” Schumer reportedly said.

Cassidy, Kennedy, and Schumer won. Ross-Castor came out of the FAA bill before the Senate passed it.

Notably, in 2016 Ross-Castor had passed the House 419-0.

Hensarling and his allies say they’ve worked hard to accomodate concerns of members from coastal areas. One premise of the 2016 and 2017 reforms was making room for a private sector in flood insurance, to potentially keep premiums low while curbing federal subsidies in the government-run NFIP. This seemed to work until the recent rift.

“The politics of this get to be very challenging,” Duffy, who also sits on the Financial Services Committee, noted, “because we have some members of Congress who represent areas that are under sea level and they’re dangerous places, so to get buy-in we tried to even say, okay looking forward, shouldn’t we make some modifications and changes to the program so we don’t put new properties in dangerous places that are in the flood zone that can be grandfathered into lower rates that don’t actually meet the risk of these homes?”

“We’ve had a challenging time getting people to buy into that idea as well,” he added, emphasizing, “We have to be able to move people closer to rates that meet the risk of their property.”

“You can’t radically modify a program in a matter of five years,” Duffy conceded, “but you should get that program on a trajectory to solvency and sustainability.”

Ross-Castor may have at least passed the House, but what’s the hold up on the broader flood insurance reform package passed by Financial Services this summer?

“There is some controversy on the modest fee increases that are in the bill, there is some controversy because some people don’t believe in competition and innovation and consumer choice, and most of them are Democrats. But unfortunately, there are probably a handful of Republicans who believe that as well,” explained Hensarling. “And then, there are those who are just very jealous about guarding a grandfathering provision.”

Hensarling said, “I’ve been getting pushback from some who have coastal constituencies, I’ll put it that way.”

Conservatives supporting NFIP overhaul express their frustration bluntly. “There are some conservatives whose constituents get a subsidy from government,” Duffy said, “and some of them don’t want to see any increases, some don’t want to see substantial increases, and that’s why we worked with them to try to craft a solution that still looks out for their constituents. And increases are very gradual, but also they make long term reforms that have learned from the mistakes of the prior bill.”

“I just think it just comes down to the concern for their constituents and the government subsidy they get from the flood insurance program,” he concluded.

Philip Wegmann contributed to this report.

Emily Jashinsky is a commentary writer for the Washington Examiner.