The following is an opinion from Michael Hecht, president and CEO of Greater New Orleans Inc. and the Coalition for Sustainable Flood Insurance, regarding the White House’s opposition to the Homeowner Flood Insurance Affordability Act, which would delay most premium increases called for under the 2012 Biggert-Waters flood insurance law. The White House yesterday said it opposes the bill now being considered by the Senate and urged Congress to take a more targeted approach to assist needy homeowners rather than the broader Senate rollback of reforms.
On the eve of the State of the Union, an address that will reportedly focus on “the middle class, the economy and economic fairness,” it is inexplicable that the Administration and FEMA [Federal Emergency Management Agency] have come out with a statement opposing common-sense delays to out-of-control flood insurance premiums.
The fact that this statement came out on the same day that the Senate passed an extraordinarily strong 86-13 bipartisan vote to move a bill delaying crippling hikes in flood insurance rates is even more stunning. In this day and age, we should be celebrating common-sense bipartisan action, not undermining it.
To be clear, if Biggert-Waters 2012 goes forward unabated, hundreds of thousands, and perhaps millions, of Americans who have played by the rules, built where the government told them, maintained insurance, and never flooded — will lose everything.
This would be economically catastrophic and morally indefensible. And yet, on the eve of the State of the Union, with a country in fragile recovery, this is the apparent position of FEMA and the Administration.
Let us be clear – the 250+ organizations from over 32 states across America that form the Coalition for Sustainable Flood Insurance support a fiscally sound, actuarially responsible National Flood Insurance Policy (NFIP) that communicates true risk to our citizens. Nobody wants perverse incentives for building in harm’s way, nor does anyone advocate for the continued subsidization of severe repetitive loss properties. However, we cannot support a cure for the problems of NFIP that will kill the patient – the law-abiding property owners of America.
The National Flood Insurance Program has two fundamental flaws, leading to the drastic unintended consequences of Biggert-Waters 2012: inaccurate flood maps that do not include major flood mitigation elements, like levees; and, inept program administration whereby up to 40 percent of property owners required to hold flood insurance do not pay into the program, starving it of revenue. These are problems within FEMA that must be addressed before Biggert-Waters rolls out.
An example is a primary residence in Belle Chasse, Louisiana, that was built two feet above the FEMA standard in 1996 – and has never flooded – that will see its premium rise from $633 to $17,723. With a 2,800% increase in insurance, the viability and value of this home and homeowner will be destroyed.
Statements by the Office of Management and Budget do not ring true. “Delaying implementation of reforms would further erode the financial position of the National Flood Insurance Program,” they say. The fact is, if the current law goes forward, millions will drop unaffordable flood insurance and NFIP will go into a death spiral. “FEMA is working diligently with the National Academy of Sciences to conduct a study on insurance affordability for economical distressed policyholders,” they say. FEMA has already testified on the record that current funding for such a study is utterly insufficient.
The Homeowner Flood Insurance Affordability Act, supported by a bipartisan majority of Senators, will give Congress the opportunity to address these flaws – so that flood insurance can be instituted in a way that it does not destroy the very people and property it is intended to protect. Simply put, it is impossible to “ensure that economically distressed policyholders are not unduly burdened” before we have the affordability study called for in the legislation.
Fifty-five percent of Americans live within 50 miles of the coast. Flood insurance is held in every state of the nation. President Obama should use his power as Chief Executive of America to support congress’s efforts to fix flood insurance, and to even use executive action if needed.
If the Administration wants to address income inequality, it can begin by ensuring that millions of Americans do not lose their homes.
Hecht is president and CEO of Greater New Orleans Inc. and the Coalition for Sustainable Flood Insurance