RENEE MONTAGNE, HOST:
Millions of American property owners get flood insurance from the federal government at cut-rate prices. And over the past decade the government has paid out huge sums of money after floods, pushing the flood insurance program deeply into the red. Congress aimed to fix that by authorizing higher premiums, which created such an uproar that Congress is now trying to backtrack.
NPR's Christopher Joyce reports.
CHRISTOPHER JOYCE, BYLINE: After a natural disaster, it's FEMA - the Federal Emergency Management Agency - that provides food, shelter, money - pretty much whatever people need. But before a disaster, FEMA can help too, with flood insurance - cheap flood insurance. You can buy a FEMA policy for 40 percent less than the price private insurers would offer.
But now, FEMA has a problem.
CRAIG FUGATE: We are $24 billion in debt.
JOYCE: FEMA director Craig Fugate recently sat before a congressional committee in Washington, D.C., and made the case for raising insurance rates. A string of hurricanes and floods over the past decade has drained FEMA's insurance fund. And then people rebuild in flood zones, in part because FEMA offers cut-rate prices on one-fifth of its policies.
FUGATE: The moral hazard of subsidizing risk is we're going to rebuild right where we were, just the way it was - and we're going to get wiped out.
JOYCE: But here's the weird thing. FEMA already has the right to raise rates. In 2012, Congress passed a law directing FEMA to charge real-life premiums, the kind of insurance rates that private companies would charge. Congress said you can stop subsidizing people, and FEMA did just that.
In 2013, the first rate hikes were applied to second homes and properties that changed hands. In some cases, premiums went up by thousands of dollars. And right away, the phones in Congress started ringing - so much so that Congress called Fugate in to demand a stop to the very law it passed.
Here's Congresswoman Maxine Waters, who actually sponsored the 2012 law that raised rates. The law is named after her.
REP. MAXINE WATERS: Let me just say, all of the harm that has been caused to thousands of people across this country that are calling us, that are going to lose their homes, that are placed in this position, is just unconscionable.
JOYCE: Now, Waters and other members want a lengthy affordability study to see just how high rates might go. They also want FEMA to finish updating its flood maps to see if people who are not in a flood zone now will end up in one. FEMA's Fugate doesn't think much of this idea.
FUGATE: If we are going to continue to do this, if we wait until all the maps are updated, it will indefinitely delay implementation.
STEPHEN ELLIS: It is buyer's remorse by the lawmakers.
JOYCE: Stephen Ellis monitors the ups and downs of flood insurance for a group called Taxpayers for Common Sense.
ELLIS: I mean they did the right thing and then that kind of outraged some of their constituents, who have howled quite loudly, and so now they're talking about undoing those reforms.
JOYCE: He says subsidized insurance from FEMA means taxpayers are footing part of the bill for people who live in flood zones. Moreover, he says, artificially low premiums actually encourage people to rebuild where they probably shouldn't.
ELLIS: Basically Congress is saying why didn't you protect us from ourselves? Why didn't you tell us that we were doing responsible reforms that were actually going to cost people money and have a bit of pain? Because that's what has to happen. It's the necessary medicine if this program is going to survive.
JOYCE: There's another way to look at this, though - the way Gerald Galloway does. He's an engineering professor at the University of Maryland who studies floods and advises the government on how to deal with them. He says yes, there are flood-prone places - like Louisiana - that suck up a big share of FEMA's flood money.
GERALD GALLOWAY: But wait a second. Thirty-five percent of our nation's oil and gas comes from the Gulf Coast, and these people are - live in some form of risk.
JOYCE: Galloway says they need to live there, to keep the oil and gas business running. He favors a step back from raising rates now for most homeowners, to devise ways to cushion the impact of higher rates in flood-prone places.
GALLOWAY: Recognize that it is not a flood insurance program. It is a program to maintain the viability of communities and their economy.
JOYCE: So Congress is now drafting a new law to delay the one it passed in 2012. That delay could last as much as four years, at which point the 2012 law will expire. Christopher Joyce, NPR News.