Republican and Democratic members of the House of Representatives and the Senate unveiled a bill Tuesday, the anniversary of Superstorm Sandy, that would delay the flood insurance rate increases that are starting to go into effect under a law passed last year.
The law phases out some federal subsidies for flood insurance. The intent was to stop the flow of taxpayer dollars into the National Flood Insurance Program, which is about $25 billion in debt. Supporters of the delay said millions of property owners faced much higher flood insurance rates.
“Forty percent of flood policies are in my state, and it has dried up the real estate market,” Sen. Bill Nelson, D-Fla., said at a news conference at which he and more than a dozen other senators and House members announced the bill aimed at postponing the increases, which began Oct. 1.
The legislation would require the Federal Emergency Management Agency to conduct an affordability study and give Congress time to review it. FEMA, which manages the flood program, would have to show that it had developed a flood-risk assessment program that Congress could accept. The time frame would effectively put off the rate hikes for four years.
Some lawmakers noted that more than a dozen members of Congress from coastal and inland states – liberals and conservatives – supported the delay, an unusual show of unity across party and geography. The real estate and home-building trade groups also favor the delay. Still, it was too early to say what the bill’s prospects are.
Nelson said the measure would be retroactive if it became law. Even so, “a lot of folks have lost a lot of sales,” he said.
In some cases, a homebuyer will face higher flood insurance rates than the previous owner paid. The higher insurance costs result in lower property values.
Pam Lazaroff of Holmes Beach, Fla., said she was relieved to hear that Congress might delay the flood insurance increases. Lazaroff and her boyfriend, Mike Martell, said in September that their 1959 two-bedroom home’s flood insurance would jump from $914 a year to $6,500.
“If, after a meaningful financial review of the program and its insured properties, increases may be warranted, then let’s proceed in a manner that will not put Florida back on top of the foreclosure list,” she said Tuesday.
“I didn’t buy the oldest or the smallest house in Holmes Beach, Fla., but close to it,” Lazaroff wrote in letters to members of Florida’s congressional delegation. “And I work hard to be able to own and maintain my piece of paradise.”
Opponents of the delay said it would gut a law intended to save the federal flood insurance program from insolvency and that artificially low rates allowed for risky development in coastal areas.
Supporters, however, spoke of the problems of people who wouldn’t be able to afford the higher rates.
“It’s a timeout to do an affordability study,” Sen. Johnny Isakson of Georgia, the leading Republican sponsor of the bill, said at the news conference. He said the delay would stop the unintended consequences of the 2012 law and allow time to find a way to phase in its intent of making the flood insurance program sustainable.
“We have priced middle-class people and retirees out of the market,” said Sen. Mary Landrieu, D-La.
If the delay became law, it would apply to all property owners, regardless of income.
Steve Ellis, the vice president of Taxpayers for Common Sense, a nonprofit, nonpartisan budget-watchdog group, said the bill was “essentially a backdoor tactic not to do anything.”
The flood insurance program took in $3.6 billion in premiums last year, but its debt grew to $25 billion. There are about 5.5 million flood insurance policies, and about 130 million housing units in the United States, Ellis said.
“We’re talking about a small percentage of the country getting a significant subsidy from the rest of us,” he said.
A better approach, he argued, would be to make provisions to help people with modest incomes who’d be hard-hit, while letting subsidies for others phase out.Rachel Cleetus, a senior climate economist at the Union of Concerned Scientists, a nonprofit science advocacy group, said in a blog post that artificially low rates didn’t convey the real risk of storm surges and flooding.
Lawmakers can overturn rate increases, she wrote, but “they cannot turn back the clock on sea level rise.”
Reps. Walter Jones, R-N.C., and Maxine Waters, D-Calif., were among the House members at the news conference who support the delay.
Waters was a co-sponsor of the law that phased out the subsidies. She blamed FEMA for failing to make sure its risk maps were accurate and for not conducting a required affordability study before raising rates. She said the shock to middle-class homeowners could have been avoided.
FEMA Administrator Craig Fugate said in testimony to Congress last month that the 2012 law gave little leeway for helping people keep their homes when the rates became unaffordable. He said FEMA needed two years to complete the study.
Jones said Tuesday in a statement that changes to the flood insurance program were necessary but shouldn’t be done in ways that would cause homeowners in his district in eastern North Carolina and elsewhere to “face sudden exorbitant rate increases.” He said the delay would “allow time for adjustments to be made to ensure that the program remains financially sustainable and that flood insurance rates remain affordable.”
The Government Accountability Office, the investigative arm of Congress, said in a report earlier this year that the National Flood Insurance Program wasn’t likely to generate enough money to repay the billions of dollars it had borrowed from the federal government to cover claims.
After Hurricane Sandy, Congress passed legislation to allow the program to increase its borrowing to more than $30 billion.
Manatee County, Fla., commissioner John Chappie said delaying the rate hike would be a good start. His district covers the county’s island communities, Sarasota Bay and Cortez, Florida’s oldest working fishing village.
“I don’t think they really think these things through because it’s apparent here,” he said.
Florida has the most flood insurance policy holders, at more than 2 million, and since 1978 has the second most claims in the program, at 240,374. It ranks fifth in total payments, at $3.7 billion, behind Louisiana, New Jersey, New York and Texas, according to FEMA data.