This article is republished from The Conversation, an independent and nonprofit source of news, analysis and commentary from academic experts. Ivis Garc铆a is an Associate Professor of Landscape Architecture and Urban Planning at Texas A&M University.
Anyone who has been through a flood or hurricane knows : waterlogged furniture piled on curbs, gutted homes with mold creeping up the walls, families displaced for months. But the recovery isn鈥檛 the same for everyone.
While subsidizes risky coastal and waterfront development for wealthier homeowners by lowering the cost of living in these areas, in flood-prone areas remain stuck with risky properties and little help.
As a , I鈥檝e witnessed how perverse incentives create different cycles of vulnerability across income levels. The problem with federal disaster insurance today isn鈥檛 just about subsidizing wealthier coastal homeowners 鈥� it鈥檚 equally about leaving low-income households systematically underinsured without resources to either protect themselves or leave.
Federal flood insurance鈥檚 moral hazards
The National Flood Insurance Program was to provide affordable flood insurance to the public while encouraging floodplain management.
Communities that are required to adopt regulations to reduce flood risk in their areas for their residents to qualify. The insurance policies, around 4.7 million today, are purchased either through the program or insurance companies but administered and underwritten by the Federal Emergency Management Agency, the nation鈥檚 disaster response agency. When the policy cost is lower than the risk, the property is .
The National Flood Insurance Program did succeed in providing accessible insurance for many people, but it also produced a 鈥�,鈥� where people take on risk without bearing its full consequences. What鈥檚 less well understood is that this operates differently by income level.
FEMA is currently working to adjust flood insurance prices to more closely match each property鈥檚 actual risk. The program鈥檚 changes, which began in 2021, aimed to transition policies to full-risk pricing for everyone. The annual premium increases are capped by law at 18% for primary residences, so full-risk pricing , according to federal estimates.
But there鈥檚 another, less visible problem: Federal flood insurance already wasn鈥檛 affordable for many people.
In low-income neighborhoods, , and their uninsured losses when they experience flooding often exceeds 20% of their annual income.
Many families are unable to afford federal flood insurance premiums 鈥� , according to FEMA. Instead, homeowners may , . When floods do occur, these households can face catastrophic .
Homeowners and renters may also but that provide less coverage in a disaster, and even those plan costs can be high.
Because the federal flood insurance program doesn鈥檛 specifically help those who cannot afford premiums, this creates a structural trap: Wealthier homeowners receive government-subsidized insurance support for risky properties, while many lower-income households fall outside the system entirely.
Severe repetitive loss homes
FEMA鈥檚 repetitive loss properties also tell a story. Roughly 1% of National Flood Insurance Program properties are considered 鈥渟evere repetitive loss鈥� homes 鈥� those with multiple flood events over a 10-year period. Historically, those properties have accounted for .
Low-income households that can end up experiencing repeated losses, depleting their savings and leaving them facing persistent instability.
My research in Puerto Rico has shown how this repeated rebuilding , trapping families in a cycle where each disaster pushes them further into poverty and housing insecurity rather than allowing them to recover, what sociologists call 鈥渄ownward mobility.鈥�
Breaking both cycles
Addressing these moral hazards requires different responses.
Income-based assistance programs such as FEMA鈥檚 can help ensure families aren鈥檛 priced out of safety. For example, the upfront cost of home improvements that could reduce a home鈥檚 flood exposure, such as elevating the home or flood-proofing the property, can be too high for many people to afford, but assistance programs can help.
Voluntary can also be effective in helping low-income homeowners relocate from risky properties 鈥� if those programs offer fair market value, meaningful relocation support and timely implementation. Prolonged, underfunded buyout processes can to manage.
The National Flood Insurance Program has another ongoing problem as more people move to flood-risk areas and as . By early 2025, the program was about to the U.S. Treasury, even after Congress canceled $16 billion in debt in 2017. That debt accumulates $1.7 million in interest daily 鈥� costs borne by current and future policyholders through their premiums.
I believe fixing federal flood insurance will require an approach that prices risk accurately for those who can afford it while providing genuine assistance for low-income homeowners, for example, through affordable insurance, aid for projects that reduce homes鈥� vulnerability or equitable buyouts.
The water will come again. Flooding will strike both the insured mansions on the coasts and the uninsured mobile homes inland. The question is whether U.S. policies will continue leaving different forms of moral hazard for rich and poor or whether the government will finally align the country鈥檚 disaster response with reality.
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