Attempt in Washington to stop flood insurance rate hikes fizzled

Published Dec. 21, 2013

WASHINGTON — The senators called a news conference to demonstrate they were serious about tackling soaring flood insurance rates. Help is coming, they promised homeowners in Florida, Louisiana, New Jersey and North Dakota.

That was Oct. 1. On Friday, the U.S. Senate split town for the year — the House packed up last week — without addressing the issue.

The failure underscores how unprepared lawmakers were to deal with an emergency they helped create, along with the hurdles awaiting in 2014.

"They created false hope," said Pinellas County Property Appraiser Pam Dubov, who has long warned that the 2012 Biggert-Waters law that created the increases could cause a real estate crisis.

Florida has more subsidized flood insurance policies facing sharp rate hikes than anywhere in the country — 50,000 in Pinellas County alone — and some homeowners are seeing annual increases from $2,000 to $10,000 or more.

The proposed legislation would delay any changes for four years while the affordability of rates and accuracy of flood maps are explored. It affects people who buy homes that have subsidized rates or those who will see higher rates under new maps.

Lawmakers insist they are building momentum. Sen. Mary Landrieu, D-La., said she has an agreement from Majority Leader Harry Reid to fast-track the bill when the holiday recess is over in early January.

"I have every confidence it will pass," Landrieu said. "What's most important is for us to get a very strong vote in the Senate to send a very strong signal to the House that this is a serious national issue that must be addressed."

But some Republicans on the Senate Banking Committee have already objected — killing what looked like a symbolic effort last week by Landrieu and Sen. Bill Nelson of Florida to take up the bill — and say the legislation needs to go through the normal vetting process.

A House version has steadily gained support, with about 170 co-sponsors, but also did not reach the floor and faces influential conservative opponents who say it's time to wean homeowners off subsidized insurance rates and stabilize a National Flood Insurance Program that is $24 billion in debt. A more limited House bill was suddenly pulled from consideration last week, under fire from backers of the broader legislation — conflict that adds to the cloudy prospects.

The 2012 law was intended to make structural changes to a program that has long drawn criticism, for its subsidies and for paying claims on properties that repeatedly flood. But the sticker shock many are seeing has caused alarm among lawmakers, most of whom voted for the reforms.

"In light of the widespread support for this legislation, I'm very disappointed that Congress has adjourned for the year without helping our nation's home­owners," said Rep. Maxine Waters, D-Calif., one of the original law's authors. "I will continue to fight for Congress to consider and approve this important legislation soon into the New Year. I encourage our nation's citizens to call their representatives and urge the same."

Some have already given up on Washington.

This week a pair of Florida state senators, citing inaction, introduced a bill that would set up a regulatory framework to incentivize private insurers to offer flood coverage.

"At this point we are working under the impression that Biggert-Waters is here to stay and we need to work together to push the private market into the flood business," said Jake Holehouse, an insurance agent who has organized community forums in the Tampa Bay area to talk about the law's impact.

"It felt like we had a true grass roots movement of getting this delayed and hopefully reversed when we had hundreds of people coming out for flood seminars and writing letters to Congress," Holehouse said. "Then we had the stories that our local delegation pushed saying that this deal was done in committee, which most people read as we officially have the four-year delay. That caused a major loss of momentum in the movement towards the delay."

While lawmakers sent those promising signs, there was also evidence of the challenge.

The first sign of trouble was the October news conference, which fell on the day some of the sharpest rate hikes went into effect. The legislation to delay hikes would be retroactive but lawmakers were already behind the clock. It took them nearly a month to produce a bill.

There has also been an ongoing fight between lawmakers and FEMA, which has to carry out the law and has been accused of proceeding without completing an affordability study on risk-based rates. FEMA says funding was not provided and that it is up to lawmakers to undo what they created.

Advocates for a fix also have to win over lawmakers in states that do not see much flooding, conservatives who want the government to shed its debt and those who think the government should get out of the insurance business.

"People deserve to know the cost and risks of where they live. And taxpayers deserve to have those who choose to live in harm's way pick up their share of the tab," Steve Ellis, vice president of Taxpayers for Common Sense, testified at Senate Banking Committee hearing.

There are competing interests between real estate agents and home builders, who want the delay to pass, and private insurers, who see the government subsidies as an impediment to offering flood coverage.

Dubov, the Pinellas County property appraiser, said it's hard to speculate how receptive the private marketplace will be. But if only half the flood insurance market in Florida shifts to private coverage, it would have a huge impact on the federal flood program.

About 40 percent of all federal flood policies are in Florida, a state that has paid four times more into the program in premiums than it has received back through claim payouts.

If the federal program loses 20 percent of its premiums because of private flood alternatives in Florida, "what are they going to do?" Dubov said. "Maybe the rest of the country will start feeling our pain."