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NAHB Fights for Property Owners in Flood Insurance Bill
Acting to keep the National Flood Insurance Program (NFIP) solvent, the House Financial Services Committee on March 16 approved H.R. 4973, the “Flood Insurance Reform and Modernization Act of 2006.” The measure would allow the NFIP to borrow up to $25 billion from the U.S. Treasury to pay insurance claims and would make other changes to the program to reduce the need for future borrowing.
The Federal Emergency Management Agency (FEMA), which runs the NFIP, estimates it will need $24 billion to pay off claims resulting from the devastating destruction caused last year by Hurricanes Katrina and Rita.
Separate legislation approved by the House and Senate would raise FEMA’s borrowing authority from the Treasury to $20.8 billion, up from the current ceiling of $18.5 billion. The agency has warned that it will exhaust its current borrowing authority in coming weeks and would then be forced to stop payments to flood claimants.
NAHB’s succesful lobbying against several amendments during the House panel’s consideration of the legislation will result in significant savings for millions of property owners.
Of particular note, an amendment that would have eliminated subsidized premiums on all NFIP properties was soundly defeated by a vote of 45-10. The Congressional Budget Office estimates that entirely eliminating all subsidies would boost average premiums by about 150%.
However, the committee-passed bill does contain a provision to phase-out NFIP subsidies for vacation homes, second homes and commercial properties.
H.R. 4973 would also:
- Increase the amount FEMA can raise rates in any given year from 10% to 15%.
- Commission a study by the U.S. Comptroller General to review mandatory purchase requirements for the natural 100-year floodplain and home owners with non-federal loans. Coverage is currently mandatory for all federally-backed loans.
- Raise the 1994 coverage limits for residential flood insurance policies from $250,000 (structure) and $100,000 (contents) to $335,000 and $135,000. Non-residential properties would see an increase from $500,000 to $670,000.
- Direct FEMA to report to Congress twice a year on the financial status of the NFIP.
- Require FEMA to conduct a comprehensive review of the nation’s flood maps — including mapping of the 500-year floodplain — and to report its findings to Congress.
H.R. 4973 now moves to the House floor, where NAHB will continue to support common-sense reforms that represent the interests of the housing community.
In the Senate, Banking Committee Chairman Richard Shelby (R-Ala.) has indicated that his panel plans to advance a flood insurance overhaul measure in the next few weeks.
Established in 1968, the NFIP offers affordable flood insurance to home owners and businesses in flood plains and other low-lying areas that otherwise might not be able to obtain coverage.
More than 20,000 communities nationwide participate in the NFIP and the program currently covers approximately 4.8 million policyholders.
To read the House legislation, click here and enter H.R. 4973 in the box at the center of the page.
For more information, e-mail Scott Meyer at NAHB, or call him at 800-368-5242 x8144.
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