The powerful home builders’ lobby helped kill a proposal that would have phased out coverage for new construction in high-risk areas. The National Association of Realtors blocked an attempt to rein in discounted insurance rates that homeowners can get when their flood risk increases. And the American Bankers Association has warned of a “regional foreclosure crisis” if Congress axes coverage for homes with excessive claims.
Lawmakers who want to reel in the program are finding that they must appease the influential industry groups whose support they need to move forward.
“We want to have a vibrant construction industry,” said Rep. Dennis Ross (R-Fla.), who’s pushing for a greater private-sector presence in the flood insurance market. “We want to have a vibrant real estate industry. That’s all great. But we’re incentivizing building in high-risk areas, which is a moral hazard.”
People won’t build on floodplains if government (taxpayers) doesn’t subsidize the building of structures.