Congress has officially placed the bipartisan Homeowner Flood Insurance Affordability Act in hands of President Obama. If enacted, it will undo significant provisions of a 2012 law that caused sharp flood insurance rate increases.
On March 4, the U.S. House of Representatives voted 306-91 to pass the Homeowner Flood Insurance Affordability Act of 2014, H.R. 3370. This repeals portions of the Biggert-Waters Flood Insurance Reform Act. Just yesterday, March 16, the U.S. Senate voted 72-22 to approve the bill and send it to the President for his consideration.
For those who don’t remember the Biggert-Waters Act, it was passed back in 2012 with overwhelming support in both houses of Congress. It called for changes to the National Flood Insurance Program. The NFIP, as you may know, is currently running an enormous and ultimately unsupportable deficit of $24 billion, so the Biggert-Waters Act aimed to eliminate subsidies for two kinds of homes: those homes built before flood maps existed and those homes “grandfathered” in, which is to say that they were originally built to code only to find that the new FEMA maps placed them in high-risk flood zones. In doing so, Biggert-Waters caused steep rate increases for owners of these types of properties. Homeowners in Florida, for example, saw annual flood insurance rate increases from $2,000 to $10,000 under the Biggert-Waters Act.
In January, the Senate passed a bill which called for a four-year delay of the rate increases imposed by the Biggert-Waters. House leaders, however, wanted a more permanent fix, and they also wanted to avoid adding to the insolvency of the NFIP. Thus, the Homeowner Flood Insurance Affordability Act was born. The bill proposes, among other things: (1) to roll back certain rate increase “triggers” so that policyholders will no longer face rate increases as a result of the sale of a home or a lapse in coverage; (2) to provide a refund for those who already got hit under the foregoing provisions; (3) to restore “grandfathering” so that homes and businesses that were previously built to code and later remapped into a higher risk area by FEMA won’t face rate increases due to the remapping; and (4) to impose a cap on FEMA’s ability to raise annual insurance premium rates. Under the bill, FEMA can still increase premiums for owners of homes built before the flood insurance rate maps, but the increases have a hard cap of 18 percent per year (down from 20 percent under Biggert-Waters), and will typically range from only 5 percent to 15 percent.
President Obama is expected to sign the bill into law when it reaches his desk.
