Sen. Landrieu's Plan: Handouts for Vacation Homes

The government needs to stand up for little guy and help those who can't help themselves. Mary Landrieu's proposal to enact huge new subsidies for vacation homeowners is an outrage.
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No matter their stated ideologies, overwhelming majorities of Americans would agree in principle that the government should try to help the vulnerable and poor before it lifts a finger to help the well off. In forwarding a new proposal that she has tucked into a spending bill, Senate Homeland Security Subcommittee Chair Mary Landrieu (D-LA) has egregiously crashed this nigh-universal principle.

In particular, Landrieu proposes charging almost four and a half million Americans more to take part in the National Flood Insurance Program so that people who can afford second homes will pay less. Her proposal is so outrageous, indeed, that it deserves universal scorn from every one of her colleagues in Congress.

Some background first. The National Flood Insurance Program, a federal entity, is the only provider of flood coverage for almost all individuals and small businesses. Homeowners in significantly flood-prone areas, furthermore, must buy from it in order to get mortgages. Many properties pay far less for coverage than they would in the private market. Partly as a result, the program owes the Treasury about $27 billion it has no practical way of paying back.

In effort to stabilize its finances and move some responsibility for flood coverage towards the private sector, Congress last year passed some reforms that, among other things, end the subsidy gravy train for almost 350,000 second homes. (First homes are not impacted.) The logic of doing this should be obvious to anyone with a pulse: people wealthy enough to maintain two houses don't need government help to pay for insurance on the second one.

Under the current law, furthermore, the program will also charge more for businesses' flood coverage and a handful of properties that taxpayers have already rebuilt multiple times. Particularly in tight fiscal times, this is certainly a fair.

Perhaps because so many of her wealthiest constituents own homes beach houses that currently benefit from the subsidies, Landrieu like this and has proposed to continue subsidies for second homes. Because the program will still face mandates to improve its finances, this almost certainly means that flood insurance rates will rise for over 4 million people in order to benefit people who have beach houses. According to the Government Accountability Office, indeed, almost 80 percent of all properties now receiving subsidies (most of which will continue to whatever happens) sit in counties that rank in the top 30 percent of the nation's home value.

In fact, even many of Landrieu's own constituents will be hurt: all newly built and re-built properties on Louisiana's Gulf Coast pay market-like rates already and will see them rise if Landrieu's plan to benefit beach home owners succeeds. As rates rise on the great majority of homeowners, furthermore, at least a few will probably drop flood insurance rather than pay for it. There's a very real chance that Landrieu's plan will leave some people uninsured and unable to rebuild following a disaster just so a few people can pay a little less to maintain their vacation homes.

The government needs to stand up for little guy and help those who can't help themselves. Mary Landrieu's proposal to enact huge new subsidies for vacation homeowners is an outrage.

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