“NO” on the Homeowner Flood Insurance Affordability Act of 2014
Today, the House will vote on the Homeowner Flood Insurance Affordability Act of 2014 (as amended) (H.R. 3370) sponsored by Rep. Mike Grimm (R-NY) 0% and Rep. Maxine Waters (D-CA) 15%. The Biggert-Waters Reform Act of 2012 set forth much needed reforms to the National Flood Insurance Program (NFIP), which is currently over $24 billion in debt. While the Senate-passed flood insurance bill (S. 1926) would delay certain necessary reforms, the House bill would go a step further in the wrong direction and completely repeal many of those necessary reforms.
The House plan removes the requirement that flood insurance premiums return to actuarial or full-risk rates when a property is sold or its policy lapses. It repeals the prohibition on passing an existing NFIP subsidy on to a new purchaser. The bill ends the ban on the creation of new subsidized properties, including vacation homes. It also requires the Federal Emergency Management Agency (FEMA) to refund property owners who have already been charged actuarially sound rates because of previous mandates.
Repealing reforms to NFIP further inhibits any path forward to an authentic private flood insurance market. NFIP will continue to offer subsidized rates while maintaining access to borrow from taxpayers whenever necessary. Private companies can not compete with a program that offers artificially low insurance premiums courtesy of the American taxpayer. Heritage explains homeowners should pay “the appropriate actuarial premium rather than subsidized rates” for flood insurance. This would “encourage insurance companies to enter the market and would set the stage for an eventual move of the entire program to the private sector.” Currently, flood insurance is provided only by the government. Subsidies allow property owners to take more risks because taxpayers are paying for their risks.
When Congress reauthorized the NFIP in 2012, it required the phase out of subsidies on insurance premiums so that policyholders would eventually begin paying actuarially sound rates. Real reforms to the NFIP are needed now, not arbitrary delays. Taxpayers should not be forced to continue subsidizing high-risk development of flood-prone areas. The Biggert-Waters Flood Insurance Reform Act of 2012 increases financial accountability among homeowners and removes an undue burden on taxpayers. Its reforms should not be delayed or undone.
Heritage Action opposes the Homeowner Flood Insurance Affordability Act and will include it as a vote on our legislative scorecard.
Originally issued February 25, 2014.