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Policy: Law

House Republicans considering legislation to halt flood insurance rate hikes

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Politics,Congress,Susan Ferrechio,Louisiana,New Jersey,New York,PennAve,House Republicans,Law,Flood Insurance

So much for reforming the nation's bankrupt flood insurance program.

House Republican leaders have scheduled a vote this week on legislation that would halt most insurance premium increases called for under a 2012 law intended to bolster the significantly underfunded National Flood Insurance Program.

The bill would essentially halt flood insurance reforms that Congress passed overwhelmingly in 2012. It is sponsored by lawmakers from flood-prone states including Louisiana, Florida, New York and New Jersey, where high water from storms has caused millions of dollars in property damage. The 2012 flood insurance reform law, coupled with new flood maps have led to skyrocketing premiums for many homeowners in flood-prone areas.

The bill would stop most rate hikes by permanently reinstating a grandfather clause that shields those who owned flood-prone properties prior to the enactment of the 2012 law from new flood map rates. The old rates would also apply to those who purchase grandfathered properties, which Rep. Bill Cassidy, R-La., a chief sponsor, said “helps stabilize our real estate market, so home buyers don’t face large flood insurance premiums after buying a home.”

The legislation also calls for retroactive reimbursement for owners who have already payed higher premiums under the 2012 flood insurance reform law.

Taxpayer watchdog groups are criticizing the legislation, pointing to the NFIP's $24 billion deficit and the rising cost that major flooding imposes on the federal government. Superstorm Sandy, for example, came with a $50 billion price tag.

“It’s breathtaking how irresponsible this is,” Steve Ellis, vice president of Taxpayers for Common Sense, told the Washington Examiner when asked about the pending flood insurance bill. “It basically makes permanent the subsidies that these properties are getting, even though we know the flood risks have changed.”

The bill, Ellis said, effectively strips away the incentive for people to move away from flood prone areas and leaves the federal government on the hook for covering the next big flooding disaster.

But those working on behalf of the affected home owners are praising the measure as a much-needed solution to end exorbitant and unfair rate hikes, particularly for those who have flood-proofed their homes.

“The bill as it is written now is a good start,” George Kasimos, a West Orange, N.J., real estate broker, told the Washington Examiner.

Kasimos, who had to rebuild his home after Sandy, is the head of Stop FEMA Now, a group working to keep the Federal Emergency Management Agency from applying new and more inclusive flood maps on many coastal properties.

Kasimos said homeowners under the current law are being hit with massive insurance rate hikes that are unaffordable under the new maps.

The current law requires property owners in flood-prone areas to pay a 25-percent premium increase every year.

Kasimos pointed to a home where flood insurance has increased to $33,000 per year, while a hotel that has never flooded received a rate hike of 6,000 percent, to $103,000 per year.

Kasimos said the problem lies with FEMA, which he said eats up 56 percent of premiums to cover administrative costs.

“We don’t mind paying our fair share,” Kasimos told the Examiner. “The problem is mismanagement, and nobody is looking at that.”

The House legislation includes a provision to pay for halting the rate hikes. It would come in the form of an annual $25 fee for homeowners and $250 for businesses and secondary homes. The money would be used to build up the flood insurance program’s reserve fund to pay for future storms.

Ellis warned the offset proposed in the legislation won’t protect the program from future losses because most homes will not be included in the newly designated flood hazard zones.

“The risks are increasing in these areas and we are not generating more revenue to offset the risk in the long run,” Ellis said. “We are going to have more and more losses and we are not going to have the revenue to offset it.”

The bill is scheduled for a House vote this week, but so far lacks the endorsement of key Democrats, including Rep. Maxine Waters, D-Calif., a co-author of the 2012 bill.

Democrats would be needed to pass the bill if House GOP leaders decide to take up the measure under special rules that limit debate, exclude amendments and require two-thirds of all voting members to support it.

Waters opposes the premium hikes in her own 2012 bills and is a proponent of a recently-passed Senate bill that would have left the 2012 reforms in place, but delayed implementation until 2018.

In a statement on Monday, Waters said she is concerned that the pending House legislation leaves some homeowners vulnerable to unaffordable insurance increases.

“Although there have been productive conversations with Republican leadership, I still have significant concerns that the measure will not provide the necessary relief to those facing skyrocketing flood insurance premiums,” Waters said.

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