Editorial: FEMA or Congress must stop flood rate increases

FEMA or Congress must stop flood rate increases: Editorial

By The Editorial Board, NOLA.com | The Times-Picayune 

Sept. 7, 2013

The Federal Emergency Management Agency finally released details on new flood insurance rates for communities that are at high-risk of flooding, and the numbers aren't pretty. The owners of a home that is four feet below base flood elevation in FEMA's flood maps, for example, would pay an estimated $9,500 per year for coverage under new unsubsidized rates. That would be a whopping $95,000 over a decade.

FEMA noted that only an insurance agent can tell owners precisely what their home will cost to insure. The news isn't good there, either. Some Southeast Louisiana residents are being told their flood insurance will cost $20,000 or more per year when increased rates required by the Biggert-Waters Flood Insurance Reform Act go into effect in October.

If President Obama's administration or Congress needed more evidence that the rate increases should be put on hold, this is it.

Flood insurance, plus wind coverage, plus a mortgage will add up to a staggering amount of money for some families along the coast -- and not only in Louisiana. Some families may no longer be able to afford their homes. They also could have trouble selling because a buyer would be facing the same exorbitant flood rates.

Surely the federal government doesn't want to ruin the value of anyone's home.

After a visit to Southeast Louisiana in early August, FEMA associate administratorDavid Miller said he understood the concerns. "What I'm hearing is these huge increases in insurance may reflect risk, but in doing that, what does it do to property values, the structure of community, to current and future homeowners?" he said.

FEMA wants "to move it toward being right," he said.

Yet the agency has done nothing to stop the rate increases, despite multiple requests from Congress to do so.

Louisiana Sen. David Vitter urged President Obama in August to delay implementation of Biggert-Waters, as the president did with part of his health care act.

More than two dozen members of Congress asked FEMA administrator Craig Fugate in July to put a hold on the higher bills. California Rep. Maxine Waters, whose name is on the flood insurance reform act, pointed out in the letter that some homeowners are facing increases of 100 and even 1,000 times higher than they had been paying with federal subsidies.

Congress never intended that, she said. "While actuarial rates are critical to the program's success, we strongly believe that we should not burden homeowners with punitive or unaffordable rates that will slow our housing market recovery and force families out of their homes."

Unbelievably, when Congress approved the flood insurance reforms last summer, no consideration was given to affordability. The aim was to make the program self-sustaining by raising insurance premiums to market rates over time.

But the changes are turning out to be more draconian than they were predicted to be.

Biggert-Waters did away with the grandfather provision that shielded property owners from rate spikes if they had built to proper specifications but later were reclassified because of new flood maps.

In its memo on the flood rates, FEMA said, "elevating or rebuilding higher will lower your risk and could reduce your premium." That is true, of course, but it ignores the fact that tens of thousands of Gulf Coast residents rebuilt their homes post-Katrina to the old standards -- with FEMA's approval.

The suggestion also ignores the fact that elevating a home can be an expensive proposition, and homeowners may not have that much money at their fingertips.

FEMA compounded the problem for some homeowners by failing to give communities credit for local and private levees in its revised flood maps. Only federal levees were counted in the new risk calculations.

Agency officials have acknowledged the maps are flawed and say they are looking at ways to redo them, but that won't happen immediately.

For its part, Congress is considering various bills that would delay all or part of Biggert-Waters. The Louisiana delegation, along with lawmakers from New York and New Jersey, should continue to push those bills.

Congress also should take another look at a Government Accountability Office report from 2009 that found FEMA gave as much as two-thirds of flood insurance premiums to private insurers.

The private companies administer the policies, but that seems like an excessive amount of policyholders' money to give away. The GAO found that FEMA didn't enforce audit requirements of the private companies and suggested that FEMA had no idea what it actually costs to run the flood insurance program.

If management costs were reduced, more money could go back into the flood program to keep it self-sustaining -- which was the point of Biggert-Waters. Before sticking policyholders with bigger bills, Congress ought to make sure FEMA isn't wasting a dime.