With flood insurance rates rising, Congress looks to "fix" 2012 law driving increases

With National Flood Insurance Program policy rates rapidly rising for 2.7 million American homes, U.S. Rep. Thomas Marino has introduced a bill that would repeal the 2012 Biggert-Waters reform legislation that triggered the changes. (AP Photo/Mark Moran - The Citizens' Voice)

By Jeff Frantz | jfrantz@pennlive.com 
January 8, 2014

When U.S. Rep. Thomas Marino voted for the Bigger-Waters Flood Insurance Act in 2012, the National Flood Insurance Program was looking at a $28 billion deficit.

To get the federal program on firmer financial footing, the Federal Emergency Management Agency, which administers the NFIP, said premiums for those living in high risk areas might rise a few hundred dollars.

It hasn't worked out like that.

This fall, 2.7 million high risk households saw their rates jump up to 25 percent. For most of those homeowners, that was just the first of many annual rate increases until the policy reaches an "actuarially sound rate," which means the government will no longer subsidize those policies. When the rates are fully implemented, homeowners will be paying thousands -- in some cases -- tens of thousands more in flood insurance annually.

Several bills have been introduced to either amend or delay the changes, but Marino said they don't go far enough. Tuesday, he introduced legislation that would repeal Biggert-Waters completely.

"I want to repeal it because there is no fix here," Marino said. "There's no fix here unless there is substantial changes … so let's repeal this thing, then let's get back to the drawing board."

Marino -- a Republican whose district includes Mansfield, Milton, Sunbury and Williamsport -- said he is against government subsidies on principal. But in this case, many homeowners feel like the rug was pulled out from under them because they didn't know the policy their mortgage company required was subsidized by the government.

"Nobody told these people -- not the banker in the room, not the lawyers, not the insurance provider -- that this was subsided two-thirds by the federal government," Marino said.

The rising rates are making homeowners -- and taxing bodies -- across the state nervous.

Dauphin County has 10,544 homes in areas classified as high hazard flood, according to 

Commissioner George Hartwick III. Collectively, those homes have an assessed value of $1.57 billion. So far, no one has asked for a re-assessment of their home because of the flood risk. But if a cascade of re-assessments is requested, it would become a huge problem for all levels of government.

Early estimates show the county's high-risk homes could lose more than $1 billion in assessed value, Hartwick said.

If that happens, it would mean $9 million less in library taxes, $3.25 million less in municipal taxes and $20.8 million less in school taxes. If homes can't sell, or sell for lower prices, it also means less money will find its way into the county coffers from real estate transfer fees.

Harrisburg alone has 2,500 properties the NFIP considers as high hazard risk, Hartwick said. Before the rates began to rise in the fall, the average city homeowner in these zones paid $1,200 a year in flood insurance premiums for a home assessed at $150,000. When the rate hikes are fully implemented, they'll be paying $7,000 a year.

Looking in his own district, Marino pointed to Jersey Shore. Half of the town's homes are classified as high hazard. One couple, Marino said, bought and restored an old home, investing more than $100,000 in the process. They were told their flood insurance will eventually rise from a few thousand dollars a year to $40,000. If that's the case, they can't keep their home.

"Are all these towns going to become ghost towns?" Marino said.

Marino acknowledges the old system didn't work either.

Repealing Bigger-Waters should just be the first step, Marino said. After that, the government should begin looking at ways to help homeowners protect their homes against floods with an aim toward reducing the need for subsidies in the future. State and federal officials should explore dredging flood-prone creeks and streams. Going forward, FEMA should also be more aggressive in buying homes that routinely get washed out, and converting them to green space.

All those approaches have costs, Marino said, but they should be looked at, but paying for floods should be looked at comprehensively. Along that line, he said the country should consider starting a catastrophic fund that would help Americans recover from natural disasters like tornadoes, earthquakes and floods.

"If we can bail out the banks and we can bail out the auto industry, we should be able to take care of American homeowners," Marino said.