Spending Bill Delays Hike in Federal Flood Insurance

Wednesday, 15 Jan 2014 05:46 PM

 

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Sharp increases in flood insurance premiums for many U.S. homeowners will be delayed for at least nine months under a provision of the $1 trillion government spending bill that was approved on Wednesday by the U.S. House of Representatives.

The stop-gap measure provides temporary relief for some property owners facing steep increases in premiums, while buying time for Congress to tackle a larger reform bill seeking a four-year delay of implementation.

The federal spending bill now moves to the U.S. Senate, which is expected to pass it this week and send it to the White House for President Barack Obama's signature.

Members of Congress from several coastal states such as Florida, Louisiana and New Jersey are seeking to reform the 2012 Biggert Waters Flood Insurance Reform Act that boosted premiums in flood risk areas. They have pushed for a measure that would require the Federal Emergency Management Agency (FEMA) to complete an affordability study and re-evaluate the accuracy of new flood maps before increasing future flood insurance premiums.

The provision will "halt increases for existing homeowners and help approximately 2 million Florida families through fiscal year 2014," said U.S. Representative Kathy Castor, a Democrat from the Tampa bay area.

"During the delay, the Federal Emergency Management Agency and Congress need to go back to the drawing board for a permanent fix to ensure that our neighbors and small business owners do not suffer unconscionable increases," Castor said.

The provision in the Omnibus spending bill covers only about a quarter of the policies affected by the Biggert-Waters Act, according to an estimate cited by Florida Senator Bill Nelson, also a Democrat.

"Congress, it seems, is finally hearing the pleas of some of the homeowners," Nelson said in a statement. "This is only a partial solution and there is still work to be done," he added.

Leaders of both parties in the Senate are trying to see if they have enough agreement on amending the Biggert Waters law before a recess that starts at the end of this week.

"We have a bipartisan coalition that badly wants to get this done and so we're going to do everything we can to move forward on this," Senate majority leader Harry Reid said on Wednesday.

He noted that Republicans had not yet signed off on going ahead, however. If there is no agreement today on moving forward Reid said "We'll tee this up so it's the first vote we have" after the recess.

"Hopefully we'll be able to figure out a way forward here in the not-too-distance future," said Senate Republican leader Mitch McConnell.

Congress passed the Biggert Waters Act in July with strong bipartisan support in an effort to balance a $24 billion deficit in the National Flood Insurance Program, which had growing losses from Hurricane Katrina in New Orleans in 2005 and earlier disasters. Months after the bill was passed, Superstorm Sandy devastated the northeastern coast in late October.

The rate hike is designed to make property owners pay for the true risk of living in high flood hazard areas, including coastal areas of Florida, New Jersey, New York, Texas and Louisiana, and inland states prone to river flooding.

The hike could affect a million homeowners living in older houses along U.S. coastlines and river banks, with the annual flood insurance premium on some homes set to jump tenfold over the next few years.

The Biggert Waters Act requires FEMA to phase out insurance subsidies enjoyed for decades by owners of homes that were built in high-risk flood zones before the creation of the original federal flood insurance rate maps and building standards, which in most communities occurred in the 1970s and 1980s.

Critics of subsidized federal flood insurance say the benefits disproportionately favor high-risk properties owned by wealthy people.

FEMA Director Craig Fugate told a September hearing of the U.S. Senate Banking, Housing and Urban Affairs Committee that the act unfairly hit middle-class homeowners who had not been flooded repeatedly.

© 2014 Thomson/Reuters. All rights reserved.

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