WASHINGTON (AP) — Homeowners living in flood-prone areas
are getting relief from big spikes in insurance costs under legislation
President Barack Obama signed into law Friday.
Lawmakers from both
parties supported the measure in response to angry homeowners who faced
sharp premium hikes after an overhaul of the government’s flood
insurance program two years ago.
Democratic Sen. Robert Menendez
of New Jersey said he was hearing from constituents still reeling from
Superstorm Sandy, "many who came to me in tears, expressing horror
stories of skyrocketing flood insurance premiums that threatened to
force them from their homes."
The 2012 rewrite was aimed at
weaning those in flood-prone areas off of subsidized rates and required
extensive updating of the flood maps used to set premiums. But its
implementation left homeowners along the Atlantic and Gulf coasts and in
flood plains facing often unaffordable rate increases.
The new
law caps flood insurance premium increases and
allows below-market
insurance rates to be passed on to people buying homes in flood zones
with taxpayer-subsidized policies.
Critics say taxpayers will end
up footing the bill when the next disaster strikes instead of homeowners
who choose to live in areas susceptible to flooding.
The
legislation offers its greatest relief to owners of properties that were
originally built to code but subsequently were found to be at greater
flood risk. Such "grandfathered" homeowners currently benefit from
below-market rates that are subsidized by other policyholders, and the
new legislation preserves that status and caps premium increases at 18
percent a year. The 2012 overhaul required premiums to increase to
actuarially sound rates over five years and required extensive
remapping.
Many homeowners faulted the Federal Emergency
Management Agency’s implementation of the 2012 law. In some instances,
homeowners from areas that had never been flooded were shocked and
frightened by warnings of huge, unaffordable premium increases. The
resulting uproar quickly got the attention of lawmakers from both
parties.
"Today, draconian flood insurance rate increases have
been stopped, and we have returned affordability as a centerpiece of the
National Flood Insurance Program," Sen. Mary Landrieu, D-La., said in a
statement.
Another provision, eagerly sought by the real estate
industry, allows sellers of older homes built before original flood
insurance risk maps were drafted to pass taxpayer-subsidized policies on
to the people buying their homes instead of requiring purchasers to pay
actuarially sound rates immediately, as required by the 2012 law. Those
rates had been particularly high in older coastal communities in states
like Florida, Massachusetts and New Jersey, and have put a damper on
home sales as prospective buyers recoil at the higher, multifold premium
increases.
People whose second home is in a flood zone and those
whose properties have flooded repeatedly would continue to see their
premiums go up by 25 percent a year until reaching a level consistent
with their real risk of flooding.
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