After months of stonewalling on flood insurance, the U.S. House's bipartisan approval this week of legislation aimed at addressing soaring premiums offers relief for some property owners. But the House bill is dramatically different from the approach the U.S. Senate approved and risks repeating some of the mistakes of the 2012 law that caused this mess. The Senate should thoroughly examine the House's approach and ensure it is not just the most convenient political solution to a public policy problem.
The House bill approved Tuesday night is a study in political compromise. House Republican leaders were unwilling for months to consider a bipartisan Senate plan supported by the majority of House members. The Senate bill would delay implementation of the 2012 Biggert-Waters Act for homeowners for up to four years to create time for more study of the entire program. Instead, House Republican leaders insisted that any response to soaring premiums still address the flood insurance program's $24 billion debt after Hurricanes Katrina and Sandy.
But two years after Congress made a big mistake passing Biggert-Waters without understanding the consequences, it's still not clear the flood insurance program has the tools it needs to establish fair or affordable rates. The Federal Emergency Management Agency has yet to convincingly explain how its new rates are sometimes 10 times higher or amount to a significant percentage of the home's net worth — particularly when the Government Accountability Office has noted it doesn't have elevation levels for individual properties. News reports have detailed cost-cutting in flood map drawing and how wealthy waterfront property owners have successfully won lower premiums through map challenges, while their neighbors still face higher rates. That's fine for the wealthy owners, but it's unfair to everyone else who does not have the time or money to challenge the maps.
The House bill would repeal the Biggert-Waters provision that would end premium subsidies for those properties placed in higher risk flood zones by updated flood maps. But FEMA cannot even tell Congress how many of those "grandfathered" policies exist.
On the plus side, under the House plan, new buyers of properties built before flood insurance maps existed no longer would have to immediately pay actuarially sound rates. That has stalled sales on older homes in some neighborhoods and threatened the value of the biggest asset for many families and businesses. The House also would limit rate increases for those same owners from an average of 20 percent annually until they reached actuarially sound rates to 15 percent. No individual policyholder would pay more than 18 percent more a year. Business and second home owners, however, would still pay an average of 25 percent more.
The House bill has some cursory plans for beefing up consumer protections, improving communications when federal flood maps are redrawn and attempts to address affordability. And it is better than the status quo. But unlike the Senate bill, it doesn't acknowledge that significant questions remain about the flood insurance operation. Two years ago, Congress passed Biggert-Waters without doing its homework. It's at risk of repeating the same mistake if the Senate just rubber-stamps the House plan.