Homeowners across the country are currently facing astronomical flood insurance rate increases as a result of reforms made to address the solvency and affordability of the National Flood Insurance Program, which protects homeowners from flood losses. With premiums expected to double or even increase tenfold for some homeowners in the Tampa Bay area, Congress must find a long-term solution to ensure flood insurance remains affordable for both current and future homeowners.
To substantively address this issue and provide relief to homeowners throughout Tampa Bay, I have introduced the Homeowners Flood Insurance Relief Act, which will cap annual NFIP premiums to no more than the appraised valued of the structure at the time of purchase divided by 30, which represents the typical timespan of a homeowner's mortgage. It also phases in rate increases over 10 years and would allow homeowners to pay premiums on a more affordable monthly basis.
These commonsense reforms not only continue the intent of the NFIP to protect homeowners from devastating floods, but also ensure the program is able to cover its costs. Furthermore, it does this in a more economical manner for homeowners, ensuring they remain in the program and that increased premiums do not deter the housing market's recovery. To date, no other congressional proposal truly addresses the affordability and sustainability of the flood insurance system.
It is important to stress that the reforms made to the NFIP were not intended to cause the dramatic increases that homeowners are currently experiencing. However, some Floridians have been quoted annual premiums of $10,000 or more. This is an untenable financial burden during these difficult economic times that will negatively impact our already fragile housing market and requires correction.
Until 2005, the NFIP had generally been able to cover the cost of flood losses incurred by its policyholders. However, the 2005 hurricane season resulted in unprecedented flood damages, and consequently, unsustainable payouts from the NFIP. Hurricanes Katrina, Rita and Wilma resulted in approximately $18 billion in debt owed to U.S. taxpayers. Following Hurricane Sandy, the program's debt skyrocketed to $24 billion — an amount FEMA admits it will likely never be able to repay.
This debilitating debt put the existence of the program at risk. Congress was faced with a stark choice: reform the program to ensure homeowners were protected or end it. The program needed improvements, so it could operate in an actuarially sound manner — like a true insurance program. The loss of the program would have caused financial institutions to stop making home loans in flood-prone areas, including Florida, which would have had devastating impacts on our housing market.
The Homeowners Flood Insurance Relief Act addresses the unintended consequences of these reforms by implementing a long-term solution that affirms the affordability and solvency of the program. Congress cannot afford to kick the can down the road by just postponing the rate increases — a path it too often defaults to.
Rep. Gus M. Bilirakis, a Republican, represents Florida's 12th District in the U.S. Congress. He wrote this exclusively for the Tampa Bay Times.