The relief that builders and remodelers felt last July when Congress extended funding for the National Flood Insurance Program (NFIP) has turned out to be unexpectedly short-lived. Now they’re alarmed by provisions in the Biggert-Waters authorization act that, in an effort to return the NFIP to solvency, impose significant premium rate increases on some homeowners.
The premiums are slated to rise for some homeowners in October, but the House of Representatives has voted to delay by one year any increases in flood insurance premiums on grandfathered policies. Should the Senate act in kind, that may settle some immediate concerns. But builders fear there’s a deeper resentment in Washington, particularly among budget hawks, against using taxpayer money for programs that have an impact on homeownership, purchases, or rebuilding.
Flood insurance is mandatory for homeowners with federally backed mortgages living in areas subject to flooding every 100 years. About 5.6 million policyholders pay anywhere from $600 to $1,300 in annual premiums to get the roughly $1.282 trillion worth of subsidized insurance. But several years of devastating natural disasters and escalating property damage claims have left the NFIP at least $20 billion in the red. Biggert-Waters — which was passed before hurricanes Isaac and Sandy wreaked havoc last year — called for the phasing out of subsidies and discounts on flood insurance premiums and pushing more risk onto private-sector insurers and policyholders.
Some builders also note that the passage of Biggert-Waters exposed deeper flaws in the way disaster-related insurance is thought about, determined, and paid for in this country. For example, why does the federal government mandate insurance against property damage caused by flooding but not by other severe weather or seismic events such as hurricanes, tornadoes, or earthquakes?