Reversal on flood subsidies

Langevin
Langevin

Rhode Island homeowners have made their voices heard on flood insurance.
A little more than a year after members of the state’s congressional delegation all voted to scale back federal subsidies in the National Flood Insurance Program, all four now support blunting the impact of those changes.
Rhode Island’s two House members are backing a bill that would keep current subsidy rates in place for at least the next four years.
Anguish from homeowners whose flood-insurance premiums are skyrocketing due to the changes has prompted the reversal in Congress, where proposals to help constituents are getting bipartisan backing.
“People are seeing sticker shock when their flood-insurance rates are rising,” said Rep. James R. Langevin, D-R.I., a co-sponsor of the Homeowner Flood Insurance Affordability Act and most vocal member of the Ocean State delegation on the issue. “Unless we do something they will continue to rise until the subsidies go away and some people could be forced from their homes. Some people are paying as much for flood insurance as they are for their mortgage.”
The state’s other U.S. House member, Democrat David N. Cicilline, also supports the bill and intends to sign on as a co-sponsor, spokesman Richard E. Luchette said.
Sens. Jack Reed and Sheldon Whitehouse, both Democrats, have not signed on to a bill but their spokesmen say both support relief for homeowners faced with flood-insurance changes and are investigating the best way to provide it.
The law responsible for the flood-insurance changes happening this year, the Biggert-Waters Flood Insurance Act of 2012, was written in the wake of Hurricane Sandy, and before it Tropical Storm Irene, the March 2010 floods and Hurricane Katrina.
Those storms had left the National Flood Insurance Program with a $25 billion deficit and many policy experts wondering whether taxpayers should continue paying for houses to be rebuilt, in some cases more than once, in flood-prone areas.
The Biggert-Waters bill prevented the flood-insurance program from lapsing altogether and was contained within a larger transportation bill, which Langevin said was the reason he and others supported it. Congress created the National Flood Insurance Program in 1968 to write policies for properties in low-lying and coastal areas that private insurers wouldn’t cover.
Since then, the program has become the only source of flood insurance for most houses and has allowed people to get mortgages to buy existing homes and financing to build new ones far closer to flood plains than they would otherwise.
The premiums offered by the National Flood Insurance Program were set well below the amount needed to cover the risk of claims, especially for older houses, which were offered “grandfathered” rates.
That changed in the summer of 2012, with budget cutting and rising sea levels major concerns in Congress. Biggert-Waters overhauled the flood-insurance program to reduce the size of its losses and make it more sustainable.
The law cut off grandfathered rates for businesses, second homes and properties that have been severely damaged by floods in the recent past.
Primary residences were allowed to keep the old rates, but only as long as they remained with the same owner. Each time a property with a grandfathered rate is sold, it will immediately be subject to a premium reflecting the full actuarial risk.
Flood maps were redrawn to reflect more recent storms, subjecting many properties not previously in a flood zone to the higher rates.
In Rhode Island, some homeowners saw the cost of flood insurance rise as much as $50,000 annually.
As of September, the National Flood Insurance Program had 16,135 policies in Rhode Island with 6,755 subsidized and about 2,100 expected to lose those subsidizes immediately because of the changes for second homes, businesses and past flooding incidents, according to Floodplain Manager Michelle Burnett.
Some owners who never had flood insurance found out they now needed it when they tried to sell their homes and had buyers back out after learning how much it would cost them in order to get a mortgage. Rhode Island Association of Realtors CEO Susan Arnold told Providence Business News recently that many agents are scrambling to understand the changes and that, while they haven’t had a noticeable negative effect on the larger market, some properties have taken major hits to their value.
The Langevin-backed bill would freeze rate changes for two years, during which time the government would conduct an affordability study, after which there would be another 18 months for Congress to implement a plan based on the findings and another six months for legislative action.
Of course, delaying and studying the cost of insuring homes in flood plains is not going to reduce the cost to taxpayers or hold back rising waters during the next big storm.
While Langevin pointed to the number of modest homes affected by the changes, supporters of flood-insurance reform say that on average, homeowners are wealthier than renters and coastal homeowners make more than the average noncoastal homeowner. As a result, subsidized flood insurance broadly redistributes resources from lower incomes to higher incomes, something not generally supported by Democrats.
At the same time, it also doesn’t align well with the positions of many environmental groups who would like to see less development along the shoreline as sea levels rise and flooding becomes more common.
“If anything, the rise in the flood-insurance rates reflects that climate change is changing our assumptions about living in harm’s way on the coast,” said Peter Hanney, spokesman for Save The Bay.
On the question of whether subsidized flood insurance disproportionately helps the wealthy, Langevin said the study would help the government tailor changes so that they don’t.
“My observation is, on balance most of the people are from working-class families, but this is what the study will determine and maybe at the end of the day we will have to do a rollback on subsidized insurance rates,” Langevin said. •

No posts to display