On Thursday the US Senate gave final congressional approval to the Homeowner Flood Insurance Affordability Act (HR.3370). The bill passed the Senate 72-22. It has passed the House and will now head to the President’s desk for signature.
The bipartisan legislation going to the White House includes offsets for the costs of H.R.3370, which would limit annual policy rate increases, force FEMA to certify its mapping methodology, and set milestones for FEMA to carry out a flood insurance rate affordability study, among other things.
The legislation significantly rewrites a major overhaul of the flood insurance program that passed almost unanimously in 2012. Those 2012 changes were aimed at weaning hundreds of thousands of homeowners off of subsidized rates and required extensive updating of the flood maps used to set premiums.
The White House has indicated Obama will sign the measure into law despite earlier administration reservations about a Senate-passed bill that would have delayed implementation of the 2012 law.
The bill would alleviate a provision in the 2012 law that threatens hundreds of thousands of homeowners with huge premium increases under new and updated government flood maps. Their properties were originally built to code but were subsequently found to be at greater flood risk. Such “grandfathered” homeowners currently benefit from below-market rates that are subsidized by other policyholders, and the new legislation would preserve that status and cap premium increases at 18 percent a year. The 2012 reforms required premiums increases to actuarially sound rates over five years.
Another provision, eagerly sought by the real estate industry, would allow home sellers to pass taxpayer-subsidized policies on to the people buying their homes instead of requiring purchasers to pay actuarially sound rates immediately, as required by the 2012 law. The new rates are particularly high in older coastal communities in states and have put a damper on home sales as prospective buyers recoil at the higher, multifold premium increases.
The measure would also give relief to people who have bought homes after the changes were enacted in July 2012 and therefore face sharp, immediate jumps in their premiums; they would see those increases rolled back and receive rebates.
But people whose second home is in a flood zone and those whose properties have flooded repeatedly would continue to see their premiums go up by 25 percent a year until reaching a level consistent with their real risk of flooding.
The White House did not issue an official policy statement on the measure but said during debate on the Senate bill that it still supported a phased-in transition to risk-based flood insurance rates to help ensure that the federal flood insurance program has adequate resources to pay future claims.
The measure also would give relief to people who have bought homes after the 2012 overhaul and therefore face sharp, immediate jumps in their premiums. Those homeowners would see rate increases capped at an average of 15 percent, with a maximum of 18 percent a year.
The Federal Emergency Management Agency would retain the ability to increase premiums each year, but the increases wouldn’t be as steep as required under the 2012 law. A $25 surcharge on each of 5.6 million policyholders would offset the cost of continued subsidies for about 1.1 million homeowners. Owners of second homes would pay a $250 surcharge.