A key vote on a bill that would put on hold key flood insurance rate hikes was delayed Wednesday, but the bill should be back up for a vote next week.
Senate Bill 1846 would delay rate hikes scheduled for properties subject to the Biggert-Waters Act for four years. Biggert-Waters, adopted in the summer of 2012, was designed to eliminate premium federal subsidies for flood insurance and bring more market-based pricing into flood insurance policies.
If passed next week – and the bill has substantial support from the Democrat Senate majority – the senate bill would delay premium increases through 2018 in the National Flood Insurance Program (NFIP), or until after the Federal Emergency Management Agency completes its cost study and proposes policy changes and regulations.
The Congressional Budget Office (CBO) announced on Tuesday that the Senate bill would add $2.1 billion to the National Flood Insurance Program’s existing $24 billion deficit.
The National Association of Federal Credit Unions (NAFCU) is among those who support the bill, which would continue existing subsidies. NAFCU is concerned that precipitous rate hikes could hurt housing markets that have not seen recovery, and price many out of flood insurance.
"What we’re hearing from our member credit unions is that with home loans in impacted areas new food insurance premiums would be unaffordable, particularly in areas that haven’t recovered," Brad Thaler, vice president of legislative affairs at NAFCU told Housingwire. "If the Senate fails to pass this bill, premiums will continue to skyrocket. New premiums would be unaffordable, having a serious negative impact on home values.”
While many industry watchers want to see the federal subsidies continue, organizations like SmarterSafer.org are campaigning for the legislature to adopt modifications that address such affordability concerns, while still bringing market pricing into the NFIP.
"NFIP is seriously broken and in need of substantial reforms and improvements," the organization said in a statement. "Risk-based, actuarial pricing for insurance is needed to ensure effective and fiscally-sound protection against losses from natural disasters. Risk-based rates ensure that those most at-risk bear the costs and understand their real risks."
SmarterSafer.org spokesperson Asya Pikovsky noted that more than 20% of NFIP policies are subsidized, regardless of need, and that almost 70% of these subsidies go to properties with the highest property values.
"NFIP’s artificially low rates have cost taxpayers billions, masked risk, encouraged people to live in dangerous places, and provided incentives that degrade natural infrastructure that provides a natural defense against flooding," the organization said.