More on Biggert-Waters and the NFIP (from N.J.)

Residents facing steep rise in flood insurance rates

By KEITH HEUMILLER

August 8, 2013

Drastic increases in flood insurance rates due to pending changes to the National Flood Insurance Program (NFIP) will impact many New Jersey homeowners — including those whose properties have never experienced flooding.

The changes, authorized by the 2012 Biggert-Waters Flood Insurance Reform Act and expected to take effect next year, phase out grandfathered discounts for homes that were built according to NFIP standards but have since been added to a higher-risk flood zone.

The impacts could be felt especially hard in Monmouth County, where high-risk flood zones are expected to expand by nearly 25 percent when new federal flood maps are adopted sometime next year.

“The problem is, in some cases [nationwide], these increases are 100 or even 1,000 times higher than the subsidized rates,” U.S. Rep. Frank Pallone Jr. (D-6) said in a July 26 interview. “I can understand some increases … but people can’t afford that.”

Elected officials from both houses of Congress and both sides of the aisle are working to delay the changes before they go into effect in 2014.

In June, the House passed legislation that would delay the repeal of grandfathered rates for a year, allowing time to review the provisions of the act and consider possible alternatives. Last month, the Senate Appropriations Committee passed similar legislation, which was awaiting action by the full body as of last week. Both proposals echoed legislation introduced by Sen. Robert Menendez (D-NJ) earlier this year, calling for a more gradual increase in flood insurance rates.

“The costs of rebuilding after Sandy have stretched resources thin, and many New Jersey families simply cannot afford a major increase in their flood insurance rates,” Menendez said. “So, we will keep fighting to make sure they get the relief they need.” Grandfathered flood-insurance rates have historically been applied to homes built to NFIP standards. As long as coverage was maintained, a homeowner could continue paying low-risk rates, even if the home was later categorized as being in a higher-risk zone or was given a higher elevation requirement in a new flood insurance rate map (FIRM).

Under Biggert-Waters, those discounts will be phased out beginning next year, at the same time the Federal Emergency Management Agency (FEMA) works to finalize new FIRMs throughout the state.

In Monmouth County, the new maps will increase elevation requirements for many homes that were not flooded during superstorm Sandy or Hurricane Irene.

According to sample rates released by FEMA, homes elevated to or above the required base flood elevation could see stable or even reduced flood insurance premiums once Biggert Waters is fully enacted. Homeowners whose properties are below the new required elevations, however, will see an exponential rate increase going forward.

“They are going to be forced to pay higher rates, and they are going to be forced to raise their home at some point,” said Middletown Township Administrator Anthony Mercantante, referring to township residents who didn’t experienced flooding in either of the last two major storms.

“It is extremely unfair that the federal government hasn’t looked at the facts as to why they would have to pay the same rates for flood insurance as a homeowner who experienced substantial flooding.”

Biggert-Waters was passed to help stabilize the NFIP, a FEMA-administered program that currently owes more than $24 billion to the U.S. Department of the Treasury. According to a July 3 report from the U.S. Government Accountability Office (GAO), FEMA has not repaid any principal on its loans since 2010.

In addition to eliminating grandfathered rates, Biggert-Waters will phase out subsidies from many existing policies. Subsidies apply to homes built or purchased before there was an established flood map for their community.

Beginning this year, most subsidies will be scaled back at an annual rate of 25 percent until the policy premium reflects the “full risk” of the home. Grandfathered rates will be transitioned to full-risk rates over the next five years.

According to the GAO report, however, FEMA lacks the data needed to determine full-risk rates for many currently subsidized policies and “does not have a plan to expeditiously and proactively obtain the information.” As a result, many homeowners could end up paying too little, while others would pay too much, according to the report.

Through Biggert-Waters, full-risk rates will be applied immediately to any property that is sold or requires a new flood insurance policy, leading some to fear that the act could significantly impact property values.

These and other complications have led a number of Biggert-Waters’ previous supporters — including one of its co-sponsors — to question the “unintended consequences” of the legislation.

While awaiting action from the Senate, Pallone said he and other officials have sent a letter to FEMA asking the agency to delay some of the pending changes on its own.

“We are going to keep at it,” he said.