U.S. Congress

Congress clears bill to ease flood insurance hikes

 

Highlights of the flood insurance bill

President Barack Obama will sign into law changes to the Biggert-Waters Flood Insurance Reform Act of 2012 passed Thursday by the Senate, the White House confirmed. The changes earlier had been passed by the House.

Primary home sales

One of the biggest problems created by Biggert-Waters Flood Insurance Reform Act of 2012 was that the law removed premium subsidies when a primary residence is sold. New buyers have been shocked to discover they owe thousands more than expected. And some would-be home buyers have backed off.

The changes eliminate the sale trigger and refunds any increased premiums a new homeowner paid. Going forward, rates could rise by no more than 18 percent per year until actuarially sound rates are achieved.

Homes with subsidies

Starting Oct. 1, Biggert-Waters began to phase out subsidies for owners of homes built before federal flood maps were drawn. Later this year, the same was scheduled to happen for so-called grandfathered homes that were built to code but then came under higher-risk zones and new maps.

The bill restores the rates for grandfathered homes, and for other properties and says FEMA should not increase rates more than 15 percent on average. It mandates that FEMA raise rates at least 5 percent on average for homes with subsidized rates. The increases are designed to reflect true risk and shore up the National Flood Insurance Program, which is more than $24 billion in the red.

Alex Leary, Tampa Bay Times Washington Bureau Chief


Tampa Bay Times

Relief is coming to tens of thousands of Floridians who experienced sudden, severe flood insurance rate increases or were stuck with homes they could not sell because new owners would get hit with increases.

President Barack Obama will sign into law a bill the Senate passed Thursday — in the same overwhelming fashion as in the House earlier this month — that reverses major provisions of a 2012 law that forced the rate spikes.

“While it is important to put this program on sound financial footing, middle-class families should be able to afford the insurance they need to stay in their homes,” the White House said in a statement, referring to the National Flood Insurance Program.

The Senate vote was 72 to 22. U.S. Senators Bill Nelson and Marco Rubio, of Florida, both supported the overhaul, which came months after rising anger from Floridians and others across the country.

“Something is terribly wrong when families are more concerned about raging flood insurance premiums than raging floods,” said Sen Jeff Merkley, D-Ore.

The bill, which passed the House on March 4, would eliminate a provision of the law that said government-subsidized rates disappear when a person sells a primary home; provide a refund for those who already got hit under that provision; and maintain protections for “grandfathered” properties built to code after a community adopted its first Flood Insurance Rate Map.

The legislation still allows FEMA to impose premium increases on homes built before those maps. But the increases will range between 5 and 15 percent on average with a hard cap of 18 percent per year until reaching actuarial risk.

Owners of grandfathered second homes and commercial property would also be spared, but older properties of the same type built before the Flood Insurance Rate Maps are not covered by the legislation and could face significant increases — an inequity that could drive its own outcry.

FEMA must strive to keep flood insurance policies under 1 percent of a property’s total coverage and report when it is unable to do so.

The bill does not result in lost revenue, sponsors said, because it has mandated annual increases plus an annual surcharge of $25 for primary residences under the National Flood Insurance Program, and $250 for secondary residences and businesses.

Florida has more subsidized flood insurance policies facing sharp rate hikes than anywhere else in the country — about 47,000 in Miami-Dade County alone — and some homeowners had seen annual increases from $2,000 to $10,000 or more.

People trying to sell homes complained they were stuck because their subsidies could not be passed on; the new bill reverses that.

“There are a lot of people that are going to be saved from unconscionable increases,” Nelson said on the Senate floor before voting.

He later said he wanted the bill to go further, “but passage of the House bill Thursday was widely seen as the best course of action to give homeowners some form of immediate relief.”

It was a rare sign of bipartisanship and represented a triumph for angry homeowners in Florida, Louisiana, New York and other states that are experiencing sharp rate increases and powerful interests in the real estate and home building industries.

They overcame opposition from private insurers, who said they could not compete with government subsidized rates, and conservative groups who opposed the subsidies and are alarmed by the $24 billion debt the National Flood Insurance Program has accumulated. Some environmental groups also opposed gutting the 2012 reforms because, they said, it encouraged building on sensitive land. Opponents said the loss of subsidies was necessary to keep flood insurance solvent over the long haul.

“This is politically expedient but policy cowardice,” Steve Ellis, vice president for Taxpayers for Common Sense, said in an interview Thursday, noting the 2012 law passed with broad support. He said there is need for some change, such as a more gradual phase-out of subsidized rates, “but we have to face reality, and that is we need to move toward risk-based results.

“This is potentially the beginning of the end of the flood insurance program,” Ellis said. “It’s really just one big storm, god forbid, from being completely bankrupt again.”

Despite the threat from powerful conservative groups such as the Club for Growth and Heritage Action, which said it would score lawmakers on the vote, it passed the House 306-91.

The Senate vote had been held up for days by Sen. Mike Lee, a conservative from Utah. He accused Senate leaders on Thursday of ramming through a bill that, he said, had been pushed through the House.

But Lee lost his fight and by late afternoon the bill came up for votes, somewhat unexpectedly.

Lee was able to offer a standalone bill that would prevent retroactive payments to owners of second homes who got hit with higher rates. That legislation, approved by voice vote, would still have to pass the House.

Tampa Bay Times Washington Bureau Chief Alex Leary can be reached at aleary@tampabay.colm

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