FEMA Flood Insurance Program Primarily Benefits The Wealthy: Study

A policy research group study has found that the National Flood Insurance Program, a division of FEMA, primarily benefits wealthy homeowners who build in high-risk coastal areas at the expense of U.S. taxpayers.

According to the Institute for Policy Integrity's analysis, "Flooding the Market", the flood insurance program's subsidies help wealthy Americans with large beachfront properties or vacation homes in a typical year, and low-income individuals only during severe catastrophes. According to the study, middle-income areas are the least likely to benefit from the program in any given year.

"NFIP sometimes works like a backwards Robin Hood -- using taxpayer dollars to provide subsidies for environmentally questionable development in high income areas," said Michael Livermore, executive director of Policy Integrity. "As currently structured, the program is not well-designed to target support to the people most in need."

The way the program currently works is that the federal government steps in and provides discounted flood insurance rates for people who build in areas that are too risky to be covered by the private insurance market. Then when disaster strikes, the government (and, ultimately, taxpayers) foots the bill, which effectively redistributes wealth across income groups in ways that may not have been intended.

"This program has built up a pretty significant deficit that's unlikely to be paid off, so taxpayers will have to come in and eat a significant portion of that," Livermore said. "The folks who are least likely to benefit are people in the middle of the country and [in the middle of] the income distribution."

This study comes as the House Financial Services Committee is set to advance legislation that would maintain many of the flood insurance program's current policies and potentially expand the federal government's role in the largely private insurance market for windstorm coverage.

"We're certainly not saying to get rid of the program," Livermore told HuffPost. "But if Congress thinks this is a program set up to help poor people and vulnerable populations, it's not very efficiently achieving that goal. Even if the goal is to increase economic development, the program is problematic because you're encouraging people to build on flood plains. These are some things Congress should keep in mind as they consider the future of the program."