Key House and Senate members have reached a bipartisan deal to delay the implementation of major parts of the Biggert-Waters Flood Insurance Reform Act. The agreement — which still must be codified into a bill — will ensure the government continues to subsidize flood-insurance for many homeowners who participate in the National Flood Insurance Program (NFIP) while the impact of higher rates is studied.
The agreement is a result of concerns over the implementation of Biggert-Waters, and the effect it has had on flood insurance premiums since it was passed in July 2012.
Flood insurance in the U.S. is — in the vast majority of cases — only available from the federal government through the NFIP. And since its implementation in 1968, the NFIP’s premiums for many homes have been kept low thanks to subsidies, often in the form of “grandfathered” rates for homes built before flood-zone maps were available.
But claims from recent storms such as Hurricane Katrina and “superstorm” Sandy have put the NFIP more than $20 billion in debt. Biggert-Waters was designed to help erase that shortfall by phasing out those government subsidies and having property owners pay “true premiums” for their policies.
Ending those subsidies, however — combined with new flood-zone maps from FEMA — meant some homeowners were faced with new or significantly higher insurance premiums. Potential home buyers were encountering sticker shock when learning the premiums for insuring a home in a FEMA-designated flood zone.
REALTORS®, local lawmakers, and homeowners were concerned that the resulting higher premiums were making homes less affordable. Various groups urged Congress to at least delay the implementation of Biggert-Waters until FEMA could consider the effects of removing the subsidies and raising rates.
The agreement reached Monday will do just that. It will delay the new rates for primary residences — notably for anyone purchasing a home that already has a subsidized policy, or for homeowners whose property was moved into a higher-rate flood zone because of updated flood maps.
Owners of commercial property, second homes, or whose property has repeatedly been flooded will still have to pay the higher rates; those will increase by 25 percent per year until the premiums reflect the true risk of flood risk.
Bills reflecting the agreement are being introduced in the House and Senate; they are expected to be released next week and will postpone the act for two years after FEMA completes an affordability study. The total process could mean at least a four-year delay in higher rates.