On Oct. 29, 2013, Senators Robert Menendez and Johnny Isakson introduced the NAR-supported “Homeowner Flood Insurance Affordability Act” (S. 1610), to delay unintended rate increases under the Biggert-Waters law and its implementation. Congress passed the Biggert-Waters Flood Insurance Reform Act in 2012. It required the Federal Emergency Management Agency (FEMA), and other agencies, to make a number of changes to the way the National Flood Insurance Program (NFIP) is run (see more, below). Representatives Michael Grimm and Maxine Waters have introduced the identical bill in the House (H.R. 3370).
Here’s a summary of what S. 1610 includes:
A 4-year “time out” on further implementation of the rate structure until FEMA completes the affordability study required by Biggert-Waters;
A regulatory solution to issues found in the study;
Delayed application to any property that is grandfathered or purchased after July 2012, including second homes and commercial properties;
The creation of a Flood Insurance Advocate within FEMA to investigate and assist property owners with verifying the accuracy of flood insurance rate quotes.
The bill was introduced with an impressive list of 15 Senate and 65 House original sponsors. NAR will continue pressing for additional co-sponsorship and urging its immediate consideration by Congress.
Background on Biggert-Waters
Biggert-Waters was necessary to authorize NFIP for another 5 years but included unintended rate increases. For decades, the federal government offered subsidized flood insurance in low-lying or coastal areas. In other words, the price paid was not equal to the risk involved.
When the National Flood Insurance Program found itself $18 billion in debt last year, Congress agreed to an overhaul, with new flood maps for high-risk areas and nonsubsidized rates. Lawmakers failed to grasp the ramifications of raising flood insurance rates as rapidly as they proposed.
Experts say that unless Biggert-Waters is delayed, a typical high-risk home would see its premium go up 20 percent annually until it reaches an actuarially sound rate. As an example, a waterfront home paying $2,000 for flood insurance will be paying nearly $5,000 in five years. Note: NAR is kind to say Biggert-Waters had unintended consequences. If the bill was an attempt to self-fund a program that had been government subsidized for years, how could it not create massive increases in rates?