President Barack Obama is set to sign into law a bipartisan bill relieving
homeowners living in flood-prone neighborhoods from big increases in their
insurance bills.
The legislation, which
cleared
Congress on Thursday, reverses much of a 2012 overhaul of the government’s
much-criticized flood insurance program after angry homeowners facing sharp
premium hikes protested.
The Senate’s 72-22 vote sent the House-drafted measure to Obama. White House
officials said he’ll sign it.
The bill would scale back big flood insurance premium increases faced by
hundreds of thousands of homeowners. The measure also would allow below-market
insurance rates to be passed on to people buying homes in flood zones with
taxpayer-subsidized policies.
Critics say Washington is caving to political pressure to undo one of the few
recent overhauls it has managed to pass.
“While politically expedient today, this abdication of responsibility by
Congress is going to come back and bite them and taxpayers when the next
disaster strikes,” said Steve Ellis, vice president of Taxpayers for Common
Sense, a Washington-based watchdog group. “Everyone knows this program is not
fiscally sound or even viable in the near term.”
The hard-fought 2012 rewrite of the federal flood insurance program was aimed
at weaning hundreds of thousands of homeowners off of subsidized rates and
required extensive updating of the flood maps used to set premiums. But its
implementation stirred anxiety among many homeowners along the Atlantic and Gulf
coasts and in flood plains, many of whom are threatened with unaffordable rate
increases.
The legislation offers its greatest relief to owners of properties that were
originally built to code but subsequently were found to be at greater flood
risk. Such “grandfathered” homeowners currently benefit from below-market rates
that are subsidized by other policyholders, and the new legislation would
preserve that status and cap premium increases at 18 percent a year. The 2012
overhaul required premiums to increase to actuarially sound rates over five
years and required extensive remapping.
Many homeowners faulted the Federal Emergency Management Agency’s
implementation of the 2012 law. In some instances, homeowners from areas that
had never been flooded were shocked and frightened by warnings of huge,
unaffordable premium increases. The resulting uproar quickly got the attention
of lawmakers and peppered them with complaints.
“In many cases, these are people with $100,000 homes that are getting (flood
insurance) bills that are more than their mortgage payments,” said Rep. John
Fleming, R-La. “You had certainly a significant number of people who were really
going to be hurt seriously through no fault of their own.”
The top leaders of both parties came on board, overcoming resistance from
defenders of the 2012 overhaul like House Financial Services Committee Chairman
Jeb Hensarling, R-Texas, whose turf was trampled along the way.
“Members on both sides of the aisle and a broad geographic distribution got
involved. And when you get enough members involved, it’s going to get the
attention of the leadership, and that was a major factor,” said Rep. Charles
Boustany, R-La.
Another provision, eagerly sought by the real estate industry, would allow
sellers of older homes built before original flood insurance risk maps were
drafted to pass taxpayer-subsidized policies on to the people buying their homes
instead of requiring purchasers to pay actuarially sound rates immediately, as
required by the 2012 law. The new rates are particularly high in older coastal
communities in states like Florida, Massachusetts and New Jersey, and have put a
damper on home sales as prospective buyers recoil at the higher, multifold
premium increases.
The measure also would give relief to people who bought homes after the
changes were enacted in July 2012 and therefore faced sharp, immediate jumps in
their premiums; they would see those increases rolled back and receive rebates.
Separate legislation by Sen. Mike Lee, R-Utah, would make sure that rebates
would not go to recent buyers of beach houses and other second homes. It passed
the Senate Thursday and is likely to get a vote in the House.
“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,” White House spokesman Bobby Whithorne said.
Thursday’s bill was written by House Majority Leader Eric Cantor, R-Va., and
Rep. Michael Grimm, R-N.Y., with input from Democrats like Rep. Maxine Waters of
California, whose votes were critical to House passage last week.
“We’ve solved a very short-term problem and made it a long-term problem,”
said Sen. Tom Coburn, R-Okla. “We didn’t really do our work because we were in
such a hurry to take the political pressure off of the increases in the flood
insurance rates.”
People whose second home is in a flood zone and those whose properties have
flooded repeatedly would continue to see their premiums go up by 25 percent a
year until reaching a level consistent with their real risk of flooding.
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