The effort to delay huge increases in insurance premiums for homeowners in flood-prone areas faces a skeptical House chairman who is largely standing behind the changes Congress oversaw in the nation’s flood insurance program less than two years ago.
Rep. Jeb Hensarling, the Texas Republican who chairs the House Financial Services Committee that has jurisdiction over flood insurance, wants “free-market alternatives” to the government-run program, says his spokesman, David Popp.
Hensarling and other top House Republicans aren’t inclined to back away from changes meant to deal with a program that is $24 billion in the red after bailing out at-risk homeowners whose flood insurance has been subsidized by taxpayers and other policyholders for decades.
The 67-32 bipartisan vote last Thursday in the Senate to delay some, but not all, of the changes approved in 2012 is increasing tensions over the issue.
“These drastic increases will act as a de facto eviction notice for homeowners who have lived in their homes and played by the rules their entire lives,” said Sen. Bob Menendez, D-N.J., who supported holding off the rate increases. “That’s going to drive down property values as the housing market is struggling to recover.”
But Hensarling is not alone in opposing a delay.
Rep. Randy Neugebauer, R-Texas, who chaired a hearing last November of the Financial Services Committee’s housing and insurance subcommittee, said at that time, “What we’re trying to do is separate fact from fiction here. And we’re hearing a lot of rumors. And some of those rumors … it turns out are not as represented. We do know that there are some people out there who are going to experience higher premiums. But, you know, that was the purpose.”
Rep. Lynn Westmoreland, R-Ga. is another lawmaker who backs the “tough-love” approach to implementing the flood insurance changes.
“The fundamental question posed by the flood insurance reform bill is one of fairness. Is it fair for everyone to subsidize the insurance of a few?” asked Westmoreland at last November’s hearing. “The answer is simple. Taxpayers should not continue to subsidize the flood insurance of those who live in flood-prone areas. It’s not fair.”
In many cases the changes in the flood insurance program produced unexpected, sky-high insurance rates that are unaffordable for many homeowners in flood-prone areas whose insurance has historically been subsidized by the government and other policyholders.
The Senate bill would put off for up to four years huge premium increases that are supposed to phase in next year and beyond under new and updated government flood maps. It also would allow homeowners to pass below-cost policies on to people who buy their homes. People who have recently bought homes and face sharp, immediate jumps in their premiums would see those increases rolled back.
The overhaul passed in 2012 — it too was on a bipartisan vote — was supposed to increase premiums on subsidized policies, but the beleaguered Federal Emergency Management Agency has struggled to implement it. FEMA has failed to complete a study of ways to make flood insurance more affordable and has come under assault for new flood maps that have decreed some never-flooded communities at risk.
The Senate action cheered people who live in homes or own property in coastal communities and towns in flood plains.
“Most of our homeowners require flood insurance as a condition of their mortgage,” said Jonathan Gaska, district manager for the community board that represents the Rockaway peninsula and Broad Channel, areas of New York battered by Superstorm Sandy. “And we were afraid that this would just become a ghost town — that people would just give up their homes because they can’t afford it.”
Gaska said that the 2012 law has already had a chilling effect on home sales throughout the Rockaways, which is mostly populated by blue-collar workers like police officers and firefighters.
In Seaside Park, N.J., Chuck Appleby opted to raise his bayside home by 12 feet, in part because of the threat of exponential increases in flood insurance.
“We decided to go up as high as possible,” Appleby said. “That should ensure that we get the lowest insurance rate possible. Resale value is a big concern; there’s a lot of houses for sale around here. Plus, I have kids and I want to know we’ll be safe in the next storm.”
But his parents, who live two doors down, restored their house to its pre-storm condition, deciding against raising it. Appleby says his parents cannot believe the insurance hikes will be as bad as feared.
“We had a discussion about it the other day,” he said. “My parents said they believe that if it’s going to affect so many people so negatively, there’s no way the government would ever let it happen.”