States battle feds on National Flood Insurance Program, with major implications for Florida

by | Sep 15, 2023



  • Multiple states, including Louisiana and Florida, are challenging FEMA’s new flood insurance rates, arguing they could hurt property values and wreck property insurance markets.
  • Officials say the rate hikes may force some working-class homeowners to abandon their properties or drop their insurance.
  • FEMA defends the new rates as a more equitable system, while the states involved are seeking an injunction to block the increases pending further court proceedings.

Recent changes in the Federal Emergency Management Agency’s (FEMA) flood insurance rates are drawing fire from multiple states, including Louisiana and Florida, as local governments with high concentrations of homes in vulnerable, low-lying areas fear the hikes could stifle economic growth and lead to a decline in property values. In states like Florida, there are fears the changes could further upend the state’s already struggling property insurance market.

The hearing before U.S. District Judge Darrel Papillion was part of a broader legal challenge involving multiple states. The states are seeking to block the rate increases through an injunction. Other states involved include Florida, Idaho, Kentucky, Mississippi, Montana, North Dakota, South Carolina, Texas, and Virginia.

The federal changes, which FEMA says aim to more accurately reflect the risks and costs of flood damage, could result in a significant financial burden for many homeowners and pose challenges for state and local governments that rely on property taxes to stay solvent.

Officials in Louisiana, for example, testified that the new rates could have a devastating impact on working-class communities, causing some to abandon their homes or forgo insurance altogether. Matt Jewell, president of St. Charles Parish, west of New Orleans, noted that new construction has already slowed down in anticipation of the federal flood insurance rate increases.

The concerns extend beyond individual homeowners and have broader implications for local governments. Lower tax revenues due to decreased property values could hamstring efforts to implement flood prevention and mitigation projects, which are often funded through voter-approved taxes. These efforts are especially critical in Louisiana and Florida, where flooding and storm surge is a frequent concern.

In a recent court hearing, state attorneys argued that the rate changes undermine trust in local governments. They pointed out that participating in the National Flood Insurance Program necessitates adopting building-elevation policies and flood-control measures, which are usually funded by taxes. Voters approve these taxes under the assumption that they will help keep insurance rates low. Louisiana State Solicitor General Liz Murrill, who led oral arguments before the court, said that the changes have essentially “turned us into liars” in the eyes of the public.

FEMA has defended its new rate system, claiming that it is a more equitable method of calculating premiums based on a broader range of data. The agency argues that the previous system could be unfair, causing those with lower-valued homes to pay more than their fair share while benefiting those with higher-value homes. Justice Department attorney Yoseph Desta argued that reverting to the old system would not guarantee lower rates and claimed that the states had ample opportunity to provide input during the rate-setting process.

The government’s lawyers further argued that the lawsuit is untimely and that the states lack the standing to sue over rates set by the National Flood Insurance Program.

As communities across the country grapple with the realities of climate change and increased flooding, the legal battle over FEMA’s new flood insurance rates will likely set a precedent for how the nation balances the financial costs of disaster preparedness with the economic well-being of its citizens.

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