The Senate on Thursday passed legislation to delay steep increases in homeowners’ federal flood insurance premiums, which were put in place less than two years ago to stabilize the federal flood insurance program.
The bill would delay the rate increases for four years while the Federal Emergency Management Agency completes an affordability study and certifies that new maps of flood zones are scientifically based. The vote was 67-32, with strong bipartisan support.
Its fate in the Republican-controlled House of Representatives, however, was uncertain. House Speaker John Boehner has not said whether he will bring a companion bill to a vote. Boehner’s office has said only that the House “may consider changes to the law in the weeks and months ahead that both help homeowners and protect taxpayers.”
The flood insurance premium increases went into effect starting last year under the 2012 Biggert-Waters Flood Insurance Reform Act. That law required FEMA to develop new rates for flood insurance premiums that more accurately reflected flood risks. The intent of the law was to stop losses to the National Flood Insurance Program, which has a $24 billion deficit.
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The Congressional Budget Office reported that the Senate’s flood insurance legislation would reduce revenues to the Treasury by $2.1 billion over 10 years.
The sharp rate increases raised an outcry from many of the 5.5 million policyholders around the country. Many complained that they were unable to sell their homes, because buyers would be stuck with higher insurance costs of thousands of dollars per year.
Some supporters of the legislation said the real estate industry had been hit hard in coastal areas.
The bill passed by the Senate would delay the rate hikes and protect federal flood insurance policyholders who have no annual cap on their rate increases, including homes and businesses that were built to code and later remapped into a higher risk area and those built before flood maps were released.
Sen. Robert Menendez, D-N.J., who sponsored by measure along with Sen. Johnny Isakson, R-Ga., said it was designed to “make sure that we don’t drive people out of their homes.”
The office of Sen. Kay Hagan, D-N.C., said that one Outer Banks resident said her premium rose from $450 to $8,500.
“North Carolinians who have played by the rules shouldn’t face financial ruin because of sharp increases in flood insurance rates,” Hagan said in a statement.
But Sen. Bob Corker, R-Tenn., opposed the legislation.
“Just a few months after the new flood insurance rates started to go into effect, rates that actually reflect a more reasonable estimate of the true cost of this federal program, the Senate caved to narrow parochial interests,” Corker said.
Heritage Action, a conservative advocacy group, also opposed the bill, arguing that “taxpayers should not be forced to continue subsidizing high-risk development of flood-prone areas.” It said it would include the Senate bill on its scorecard that ranks members of Congress on how conservative they are.
The legislation is an example of the difficult crosscurrents facing Washington policymakers as they balance the need to rein in $17 trillion in federal debt with the political blowback that can accompany tough restructurings of federal programs.
The White House said in a statement Monday that it opposed the Senate bill. Delaying the rate increases would weaken the financial position of the National Flood Insurance Program and reduce FEMA’s ability to pay future claims, it said.
“The administration recognizes that many policyholders may be challenged financially by the new rates and remains committed to working with the Congress to develop approaches that ensure economically distressed policyholders are not unduly burdened while maintaining the financial stability of the NFIP,” it added.
Sen. Patrick Toomey, R-Pa., with support from taxpayer, consumer and environmental groups, called for moderating the rate increases, but his amendment was voted down.
Toomey said the program would careen to insolvency while wealthy people benefited.
“Warren Buffett can buy a home, and as long as he makes it his primary residence, he can have taxpayers subsidize his flood insurance,” he said.
But Democratic Sen. Bill Nelson of Florida, whose state is home to 2 million of the affected policyholders, opposed Toomey’s amendment, saying it would “cut the heart out” of the bill.
The flood insurance program is largely in debt because of Hurricanes Katrina and Sandy. He said those storms were “two unusual events” that should not be used to calculate future premiums.
Sen. Charles Schumer, D-N.Y., said that FEMA’s flood zone maps included “areas five miles from the nearest flood.”
Congress, he said, can’t “let thousands or hundreds of thousands lose their homes while we twiddle our thumbs.”