House approves Homeowner Flood Insurance Affordability Act
Tuesday, March 4, 2014
Next step: Senate must pass amended version version of the bill in order for it to become law
On March 4, 2014, the House voted 306-91 to approve the Homeowner Flood Insurance Affordability Act (H.R. 3370) with amendments. The House amendments further reign in and hold the Federal Emergency Management Agency (FEMA) accountable for the Biggert-Waters implementation issues.
Read the NAR letter of support for the amended bill
As passed, the bill would repeal FEMA’s authority to increase premium rates at time of sale or new flood map, and refunds the excessive premium to those who bought a property before FEMA warned them of the rate increase. It also limits any premium increase to 18 percent annually and adds a small assessment on policies until everyone is paying full cost for flood insurance. The Senate must now pass the amended version before the bill can become law.
Background and Resources
The Biggert-Waters Flood Insurance Reform Act of 2012 is a law passed by Congress and signed by the President in 2012 that extends the National Flood Insurance Program (NFIP) for five years. The Act also requires significant reforms to the NFIP.
Both Florida REALTORS® and the National Association of REALTORS® have gathered together FAQs, fact sheets, videos, and other resources that detail the impact the Act and the NFIP reforms will have on real estate.
Florida REALTORS® Resources
National Association of REALTORS® Resources
FEMA Document: "The Impact of National Flood Insurance Program Changes"
Flood Info Source: City of Orlando Office of Permitting Services
(FEMA elevation certificates, flood zone info)
Flood Info Source: Orange County Roads and Drainage Division
(Special Flood Hazard Areas maps)
Debating the REALTOR® Position on Flood Insurance Reform
In addition to reauthorizing the National Flood Insurance Program (NFIP), the "Biggert Waters" Act phases-out subsidized flood insurance rates for properties purchased after July 2012, and "grandfathered" properties which are allowed to keep lower rates based upon older flood maps when new maps are issued. The law also directed FEMA to report on the affordability of these reforms so Congress could consider the impact as they took effect. That congressionally mandated report is now overdue.
NAR believes Congress should not let the rate increases go into effect until FEMA can submit its report so that Congress understands the full impact of these reforms on homeowners.
When discussing flood reform, you may be challenged by individuals or organizations that are opposed to NAR's position on flood insurance reform. Below are sample responses to opposing statements made by others.
Opposing Statement - The flood program is nearly $30 billion in debt to the Treasury. Shouldn’t premiums reflect that and help FEMA begin to pay this debt down?
- Premium dollars are used to repay any loans made to the NFIP.
- FEMA is required to pay back any loan with interest.
Opposing Statement - Premium dollars that are paid into the NFIP lower the amount spent in direct federal disaster relief payments in the aftermath of any flooding disasters. Shouldn’t NFIP premiums reflect actual risk?
- We agree that NFIP premiums should be actuarially sound. However, if flood insurance becomes unaffordable, Congress will spend more on disaster relief for uninsured properties – all at taxpayer expense.
- FEMA has not yet completed the affordability study required by Congress to understand the full impact of these reforms.
- A July GAO report indicates that FEMA does not have the data necessary to estimate current subsidies or to establish the new actual risk rates.
Opposing Statement - Doesn’t providing federally-backed flood insurance encourage development in risky areas?
- These areas are already developed or are coastal barrier areas that are already off limits to the NFIP.
- Historically, communities were built along the waterways that provided easy transportation. As a result, the historic core of older communities is often located in these areas.
- Other alternatives include remediation and relocation, which could prove costly and disruptive for property owners, neighborhoods and the communities in which these properties are located.
Opposing Statement - Why don’t we let the private market handle flood insurance?
- Roughly 5.6 million property owners depend on flood insurance in over 20,000 communities nationwide.
- The federal government provides flood insurance precisely because the private market has been unwilling to write flood insurance at rates that average homeowners can afford.
Opposing Statement - When the private market has offered coverage, it has been limited to "high net worth" owners and high-value properties.
- The federal government provides coverage and rates that average homeowners can access and afford.
- All federally-backed mortgages require flood insurance for homes in flood zones; eliminating the one affordable program available to all would put the great majority of homeowners at risk of being in default on their mortgages.
Opposing Statement - Aren’t floods coastal issues?
- Floods are not just a coastal issue.
- Flood zones exist along rivers, lakes, creeks, as well as the coasts.
- Flood disasters have been declared in every state.