Opponents of delaying Biggert-Waters flood insurance reforms and stopping the resulting premium hikes say the negative effects are being exaggerated and instead of gutting all of the reforms, Congress should target its fix, including using means-testing, to those who most need premium relief.
The current Senate bill (S.1846) to delay the Biggert-Waters reforms for four years will add to the already substantial debt of the National Flood Insurance Program (NFIP) and disproportionately help wealthy property owners at taxpayers’ expense, warns SmarterSafer.org, a coalition of business, taxpayer and environmental groups that opposes the delay.
A day after Senate sponsors of the bill held a press conference to rally support for the Senate bill and call attention to the cases of skyrocketing premiums, opponents of a delay held a press briefing to urge Congress to uphold most of the Biggert-Waters changes.
The Senate is expected to take up the measure, which has 29 sponsors, next week.
Biggert-Waters, passed in 2012, calls for a phasing out of premium subsidies long enjoyed by some policyholders and for remapping and re-rating of other properties so that premiums reflect the actual cost of the risk.
The Senate bill would delay premium increases for four years, or six months after the Federal Emergency Management Agency (FEMA) proposes policy changes and regulations to address affordability issues, which the Congressional Budget Office (CBO) estimates would occur during calendar year 2018.
The Senate bill would not block rate increases for most business properties, secondary homes or repeat flood properties. Rates on those properties are scheduled to increase by 25 percent per year until they reach full cost
While more than 80 percent of NFIP policyholders pay cost-based rates, about 1.1 million out of more than 5 million policies are subsidized, according to government statistics.
The Biggert-Waters changes are causing many property owners to complain to lawmakers about higher premiums, sometimes $5,000 or $10,000 more than they are currently paying. The reforms are also making it difficult for some to sell their homes.
“Understandably in some places this has caused consternation and hysteria as people have been talking about these numbers,” said Jimi Grande, National Association of Mutual Insurance Companies, a member of the SmarterSafer .org coalition.
Grande said the Homeowner Flood Insurance Affordability Act of 2013 (S.1846) and other measures to delay the reforms represent the “worst of Washington” in that they overreact to a problem and allow local politics to trump national policy.
“The old adage of Congress is that it does two things well: they do nothing at all or they overreact , and that is what we are seeing with this legislation that would essentially through a very clever disguise eliminate nearly all the reform that was put into place when what they ought to be doing is fitting reform to the people that are experiencing large increases in a means-tested way,” Grande said.
“There are horrible, sad stories out there of people who are facing increases that nobody would say are fair and justifiable but that is not replicable across all policyholders of NFIP,” said Grande.
He said Congress should target its response to those who are truly in need, including employing means-testing if necessary.
Ray Lehman, of the free market think tank R Street Institute, another SmarterSafer.org member, agreed. “No one should be thrown out of their homes because they can’t afford their coverage but a blanket delay is not necessary,” he said.
Lehman said the premium subsidies help the rich more than the poor at taxpayers’ expense. “The response that has motivated a push for a delay is based upon some legitimate concerns about affordability but it should be put in some perspective,” he said.
Citing Government Accountability Office (GAO) data, he said 65 percent of the policies with subsidized flood premiums are in counties that are among the country’s richest counties, in the top 30 percent of home values.
By contrast, nine percent of subsidized properties are in counties at the bottom 30 percent of home vales.
The wealthiest counties also file 3.5 times more claims than poorer counties and receive more than $1 billion more in claims payments, according to Lehman.
“So we think there is reason for means-tested help for some” but the problem is not widespread enough to justify repealing all reforms and continuing to subsidize wealthy homeowners, Lehman said.
Lehman questioned reports that the flood insurance price hikes are hurting the Florida real estate market, claiming home values and real estate sales are up statewide in the Sunshine State.
Steve Ellis, Taxpayers for Common Sense, said that halting the Biggert-Waters reforms would add to the debt of the NFIP, which is already almost $25 billion in the red. He cited a Congressional Budget Office (CBO) analysis that found the delay would reduce revenues to the NFIP by $1.2 billion and because the NFIP is under a borrowing limit, the program could end up not being able to pay all claims in the future.
The critics said if there are concerns with affordability for some property owners and with the accuracy of flood maps, those problems can also be addressed without repealing all of the reforms.
Grande called the prospects of the Senate passing a delay “decent” because some lawmakers who do not like the bill feel they must support their colleagues from coastal states.
“They will do bad things for short-sighted politics,” he said.
Grande also said that while private insurers have shown some interest in providing flood insurance, they can’t do that if they have to compete against NFIP premiums that are subsidized and below cost.
The House has a similar but limited proposal that would delay rate increases for only six months. Sponsored by Rep. Michael Grimm, R-N.Y, this bill (HR 3370) has 117 Democratic and 51 Republican co-sponsors but faces opposition from key Republicans including Rep. Jeb Hensarling (R-Texas), who chairs the House Financial Services Committee that has jurisdiction over flood insurance.