Federal Flood insurance is a tough issue. Conservatives would like to end the program or at least make it pay for itself. However, many legislators, both Republicans and Democrats, are leery of insurance costs so high as to put large numbers of property owners financially “under water.”
Rep. Candace Miller (R-MI), who voted against H.R. 3370, the Homeowner Flood Insurance Affordability Act, has this to say:
“The National Flood Insurance Program is hopelessly in debt, over $25 billion, due to the fact that politics are responsible for setting rates, not actuarial cost. As a result, too many Americans across this nation are paying rates far below what actual risk would dictate in the marketplace while others, including many who I represent, are being forced to pay into a program that they do not need or want to help subsidize lower rates for other favored groups whose risk is far greater.
“In fact, since the federal flood insurance program started, homeowners in Michigan have paid multiple times more in premiums than has been paid back in claims. This is wrong. And, just like Obamacare, this costly, unworkable, unfair and failed program is exactly why the federal government shouldn’t be in the insurance business.
Michigan is an inland state, not subject to flooding or hurricanes. Rep. Miller fails to mention the plight of homeowners in flood zones.
Rep. Michael Capuano (D-MA), who voted YES, has this to say:
H.R. 3370 requires FEMA to implement a flood mapping program that results in technically credible flood hazard data and consult with communities before using any new flood maps. It also eliminates some rate increase “triggers”. This will allow home buyers to access the same level of coverage at a comparable cost as the person from whom they are buying the home. The bill limits FEMA’s annual ability to increase rates to 18% which will help protect homeowners from huge yearly rate increases. H.R. 3370 applies only to primary residences. I filed legislation last year to delay rate increases for primary residences as well as small businesses and second homes valued below $1 million. Many second home owners and small business owners are solidly middle class. Moreover, the economies of many communities impacted by flood insurance changes rely on business generated by second homes. My legislation recognizes the reality that many middle-class communities across the country will suffer, both directly with large increased costs, and indirectly with reduced economic activity. It is simply a fact that most second-home owners and most small business owners are NOT persons of wealth. However, I recognize that primary homes should be the priority of any legislative approach…
MA is a coastal state. Rep. Capuano fails to mention the cost of relief which so concerns Rep. Miller.
Tom Reed (R-NY) must be conflicted on this issue. Normally public debt is Tom’s primary concern. Tom wrote:
Originally created in 1968, the National Flood Insurance Program (NFIP) underwent reforms in 2012 known as the Biggert-Waters Reform Act. Reed says the 2012 reforms were needed as the program lacked solvency and was pushing the burden onto taxpayers.
However, Reed met with homeowners and local business and elected officials to hear their concerns on flood insurance premium increases, looking for their suggestions on how to alleviate cost spikes.
“We’re advocating to make sure reforms are integrated in a fair way that protects hardworking taxpayers from a sharp, immediate rate increase,” Reed said. “What we’re hearing from homeowners is that the flood insurance program needs to be put on a glide path so reforms don’t suddenly gouge the pockets of taxpayers.”
In this case the concerns of property owners seem to have trumped Tom’s concern about public debt. NY is a coastal state subject to great loss from storms. Tom, rather than following his usual practice of voting with his party, joined a majority of Democrats and voted in favor. In an e-mail this week, Tom wrote:
Responding to concerns we heard from home and business owners, we are fairly protecting the Southern Tier and Finger Lakes from seeing sharp, immediate rate increases in their flood insurance premiums. In addition to protecting homeowners and businesses against skyrocketing flood insurance costs, the bill puts the National Flood Insurance Program on a long-term, solvent path.
Tom doesn’t mention his usual concern about adding to public debt. If this bill puts the National Flood Insurance Program on a long-term, solvent path, it must be because rates will eventually rise unless Congress intervenes again.
(At 18% rates would be up 200% in five years and 500% in ten years.)
© William Hungerford – March 2014