Flood Insurance Changes Hit Resistance, Face Delay

Hundreds of thousands of homeowners facing higher federal flood insurance premiums under reforms passed last year would win a temporary one-year reprieve under a measure that began its advance through the Senate on Tuesday.

The relief would go to homeowners in low-lying areas of Louisiana, Florida and other states where new government surveys could produce flood insurance premium increases so big that they might be no longer able to afford their homes.

At issue are homeowners whose flood insurance bills have historically been “grandfathered” at lower rates since they followed the rules in place at the time they bought or built their home. Under last year’s bipartisan overhaul, many of these homeowners face higher premiums when new flood maps are issued.

The Senate Appropriations Committee approved the measure as part of a $39 billion spending bill funding the Department of Homeland Security. The legislation has already passed the House as part of its version of the spending bill.

The overhaul of the flood insurance program passed last year with sweeping bipartisan support. The program has required more than $24 billion in bailouts since being established in 1968, with billions of dollars in additional costs from Superstorm Sandy still being tallied. Most of the losses came because of subsidized insurance rates and losses from repeat claims on homes and businesses flooded every few years.

Reforms like requiring higher rates for second homes are going ahead. In October, rates on businesses in flood zones and homes that have been severely or repeatedly flooded will go up 25 percent a year until the rates represent the “true risk” of flooding. And subsidized rates will lapse when a home is sold or flooded repeatedly.

Tuesday’s legislation, however, would provide relief to people whose older homes were built to the flood code in previous years or decades ago but would be judged to be at greater risk under new flood maps. Higher rates on these grandfathered homeowners would otherwise start taking effect late next year and some homeowners face multi-fold premium increases that could make their monthly payments unaffordable.

“These home and business owners played by the rules, purchased properties that were up to code and are now facing exorbitant rate hikes,” said Sen. Mary Landrieu, D-La., author of the provision. “Flood protection is not just about business and commerce or numbers on a table. It is about a culture and a unique and treasured way of life that is certainly worth preserving.”

One of the complaints from those living in coastal areas like Louisiana is that the Federal Emergency Management Agency doesn’t take into account flood prevention steps like locally-built levees when assessing flood risks. The legislation directs an additional $10 million to FEMA to help the agency take such factors into account when remapping flood areas.

Supporters of last year’s changes say delaying the premium increases means people whose homes are at lower risk of being flooded will have to pay higher premiums to subsidize those living in flood zones.

“Delaying risk-based flood insurance rates doesn’t delay homeowners vulnerability or delay the insolvency of the program,” said Steve Ellis of Taxpayers for Common Sense, a Washington-based watchdog group. “Lower-risk homeowners will see their rates increase disproportionately to offset the revenue lost from delayed rate increases on higher risk properties.”