Few Support Delaying Changes in Flood Insurance

Efforts to delay implementation of changes in the federal flood insurance program have run into roadblocks on both sides of Capitol Hill.

The leaders of the House Financial Services Committee say they are standing behind last year’s bipartisan legislation to put the flood insurance program on sounder financial footing even as the implementation of the law has sparked a chorus of complaints from constituents fearing spikes in premiums and plummeting home values.

In the Senate, attempts to call a quick floor vote on legislation to delay the changes in the program – designed to force higher premiums on properties especially at risk of flooding – appear to face opposition from both Democrats and Republicans.

Sen. Mary Landrieu, D-La., wants to add the measure to an unrelated defense policy bill, but Majority Leader Harry Reid, D-Nev., is restricting the ability of senators to offer unrelated amendments. Meanwhile, Republicans are unlikely to allow a vote that could give Landrieu, who faces a tough re-election bid next year, the chance to claim political credit.

The curbs on taxpayer-subsidized flood insurance rates are a case study in what happens when Washington takes away a government-sponsored benefit that helps a relatively small group of people.

About 1.1 million homeowners – or 1 in 5 in the program – have received taxpayer-subsidized rates and the government has financed about 60 percent of losses on their properties. Most people can retain the subsidies but can’t pass them along to people buying their home, a restriction that’s especially burdensome to lower-income older homeowners seeking to sell their houses.

The changes also promise to make it unaffordable for people in chronic flood zones to keep their homes, and they have put a damper on home sales in areas where benefits extended to current homeowners can’t be passed along to prospective buyers.

The quandary is especially felt by conservative Republicans torn between their philosophy of limited government and helping constituents facing sharply higher flood insurance premiums. Lawmakers trying to delay the law’s implementation cite horror stories of people slapped with unaffordable premium increases on modestly priced homes.

Supporters of the law say it’s mostly operating as intended, which is to hit at-risk homeowners with actuarially sound rate increases.

“What we’re trying to do is separate fact from fiction here. And we’re hearing a lot of rumors. And some of those rumors … it turns out are not as represented,” said Rep. Randy Neugebauer, R-Texas, who chaired a hearing Tuesday of the Financial Services Committee’s housing and insurance subcommittee. “We do know that there are some people out there who are going to experience higher premiums. But, you know, that was the purpose.”

Last year’s legislation promises premium increases to 1.1 million homeowners who’ve received subsidized, below-risk coverage and could sock even more homeowners whose homes met older building standards or were deemed at lower risk under previous flood maps. Under the old rules, they could retain their old rates since they followed the rules when they bought or built their homes, but they will soon lose those grandfathered rates under the new law.

The Federal Emergency Management Agency, which administers the program, has delayed implementation of the new grandfathering rules and has re-evaluated its policies to give homeowners the benefit of the doubt in instances in which older, locally built levees have protected neighborhoods for decades but don’t meet federal standards.

The changes in the program are most acutely felt in places like the Gulf Coast, the New Jersey shore and Florida.

“There are challenges to implementing the law when premiums may exceed $10,000 or in more high-risk areas where homes are not easily elevated or bought out,” said FEMA Administrator Craig Fugate. He noted that in the Gulf region, many middle-class workers need insurance to live near their jobs in industries like fishing, trade and oil exploration.

Some conservative Republicans are adopting a “tough-love” approach to implementing the law.

“The fundamental question posed by the flood insurance reform bill is one of fairness. Is it fair for everyone to subsidize the insurance of a few?” asked Rep. Lynn Westmoreland, R-Ga. :The answer is simple. Taxpayers should not continue to subsidize the flood insurance of those who live in flood-prone areas. It’s not fair.”

The much-criticized program has long offered below-cost rates for homeowners in flood zones and has racked up about $25 billion in red ink since its creation in 1968. It has been criticized for repeatedly paying off homeowners whose houses get flooded every few years.

The flood insurance program collects $3.5 billion in premiums each year, but FEMA says $1.5 billion more is required from subsidized policyholders to put it on sound financial footing as required by last year’s changes.

Financial Services Chairman Jeb Hensarling, R-Texas, didn’t attend Tuesday’s hearing, but a committee statement noted the “importance of implementing the … Flood Insurance Reform Act in order to protect taxpayers from having to continue bailing out” the flood insurance program.