Affordability of the National Flood Insurance Program: Application to Charleston County, South Carolina

In March 2014, Congress passed legislation delaying the phasing-in of premium increases on discounted flood insurance policies that had been authorized in July 2012 by the Biggert-Waters Flood Insurance Reform Act. This reversal highlights the tension between the realization of risk-based premiums and affordability of flood insurance for homeowners in flood-prone areas. This study on Charleston County, South Carolina, seeks to understand how the tension can be resolved using a voucher program coupled with required mitigation. It specifically focuses on home elevation as the mitigation method. This paper demonstrates a potential average increase of 108 to 159% for high-risk single-family properties in Special Flood Hazard Areas in Charleston moving from a current discounted premium to a full risk-based premium as proposed by the 2012 legislation. Implementation of the proposed voucher program coupled with required mitigation can reduce government expenditures by more than half over a program that does not require mitigation if the costs of elevating homes are around $25,000 and insurance policies are located in high hazard flood zones. In the coastal flood zones, cost savings are achievable even when the cost to elevate the house is as much as $75,000. However, the authors also find several conditions under which mitigation does not lead to reductions in the voucher cost, such as when the policyholder's household income is below $10,000 or when elevation cost is unusually high. (C) 2015 American Society of Civil Engineers.