Federal Spending Bill Delays Some Flood Insurance Rate Increases

Homeowners worried that new federal flood maps will send their flood insurance premiums skyrocketing would get some short-term relief under a provision tucked into a massive government-wide funding bill.

But other changes to the federal flood insurance program, including higher premiums on businesses, vacation homes and frequently flooded properties will remain in place, as well as a new rule blocking homeowners from passing insurance subsidies on to the people who buy their homes.

The provision is authored by Louisiana lawmakers and political rivals – Democrat Sen. Mary Landrieu and GOP Rep. Bill Cassidy – and comes as the Senate is poised to debate much broader relief to homeowners facing higher premiums. Cassidy is running for the GOP nod to take on Landrieu this year.

The move comes as the government is beginning to implement a significant overhaul of the much-criticized program. That overhaul passed in 2012 with sweeping support from both liberals and tea party conservatives but has caused a panic in places like Staten Island, N.Y., and the New Jersey coast and in flood-prone areas of Louisiana, Mississippi and Florida, where higher rates threaten to push some people out of their homes.

The practical effect of the Cassidy-Landrieu provision is relatively limited and can be added to the spending bill only because it does not increase the budget deficit. It blocks the Federal Emergency Management Agency from increasing premiums on people whose homes are not currently considered to be in a flood zone but are deemed to be flood prone under new FEMA maps.

FEMA has already agreed to delay the higher premiums in response to criticism that the new flood maps didn’t take into account longstanding locally built levees and other flood mitigation steps and that the premium increases are in many cases unaffordable.

The broader bill that will be debated later this month in the Senate would effectively delay the 2012 reforms for four years, a step that critics say guts them because the 2012 law expires in 2017.

Some of the most ardent supporters of delaying the premium increases are conservative Republicans from Southern states, where the new rules have sent some home values plummeting because of uncertainty over insurance rates and because subsidized rates can’t be passed along to buyers. New flood maps threaten to saddle some homeowners who are paying a few hundred dollars a year now with annual premiums of more than $20,000.

The broader flood insurance bill has bipartisan support. It would delay the new rates for homeowners facing higher rates when flood maps are updated. But people with second homes or whose property has repeatedly been flooded would still have to pay the higher rates, which are scheduled to rise by 25 percent a year until their premiums reflect the true risk of flooding.

“We need to help those affected by map changes, but we also have to help those who cannot sell their homes and those who followed all the rules and codes when building their home,” Cassidy said in a statement.

The 2012 law protected subsidies for people who receive them if their houses hadn’t been recently flooded, but does not allow them to pass them on to the person who buys their home. This has led to a severe slowdown in many housing markets. The broader legislation would allow them to transfer the subsidy when they sell their home, thereby propping up home values.

The underlying $1.1 trillion spending bill is set for a House vote on Wednesday and Senate approval later in the week.