The Homeowner Flood Insurance Affordability Act of 2013 passed by a 72-22 vote and now goes to President Barack Obama for his signature. The bill passed in the House on March 4.
The bill would limit premium increases for the National Flood Insurance Program (NFIP) under the Biggert-Waters Act to 15% of the average rate in a particular flood zone – or 18% for each individual policy.
Previously, Biggert-Waters imposed 25% rate hikes on some but not all of the approximately 5.5 million properties that are covered under the NFIP.
The NFIP, run by FEMA, has traditionally charged premiums at about 40% to 45% of their full cost, with taxpayers subsidizing the rest.
The increases under Biggert-Waters were designed to bring the NFIP's reserves more in line with the level needed should there be a disaster resulting in major coastal flooding and severe property damage. Currently, the NFIP is about $24 billion in the red – due mainly to costs associated with Hurricane Katrina.
What's more, recent revisions to the Federal Emergency Management Agency's coastal flood maps have brought an additional 35,000 homes and businesses along the U.S. Atlantic and Gulf coasts into storm surge risk zones. This brought the total number of homes and businesses at risk of coastal flooding to 4.2 million. That represents more than $1.1 trillion in risk, according to a recent report from real estate data analytics firm CoreLogic.
In addition, property values have increased considerably in recent years – and there are a greater number of coastal properties – all of which creates greater risk for taxpayers should there be a major disaster involving coastal flooding.
Opponents of the measure say it essentially guts Biggert-Waters and weakens the NFIP by making its funding model unsustainable. They warn that when the next major flooding disaster hits, the NFIP may not have adequate reserves to cover the full cost of all the damages, putting the cost ultimately on taxpayers' shoulders.
Funding the NFIP at the required levels is also critical for fiscal reasons, opponents of the measure say. They point out that the U.S. is already $17 trillion in debt and that – should another disaster strike – the government will have no choice but to borrow to cover the cost of damages.
Still, supporters of the measure say that, due to the tough economy, it was the right time to hold down premium hikes for homeowners, many of whom are struggling to keep their homes.
‘We appreciate the Senate's swift action on the legislation, which is a responsible and balanced solution to the skyrocketing flood insurance premiums affecting residential and commercial properties that were unintentionally triggered by the Biggert-Waters reforms to the National Flood Insurance Program,’ says Steve Brown, president of the National Association of Realtors (NAR), in a statement. ‘As the leading advocate for home and property owners, NAR applauds this bill for the relief and protection it will bring to businesses and families nationwide, who are experiencing financial hardship because of the extreme and sudden premium increases. We believe this legislation will bring relief to property owners by ensuring a slow and steady phase in of risk-based increases.’
For more, check out this Bloomberg News report.