As politics reigns in Washington, the nation waits for Congress to pass the Homeowner Flood Insurance Affordability Act, delaying the ill-conceived Biggert-Waters Act (BW12).
Every president in modern history has proclaimed homeownership to be the American Dream. But in July 2012, Congress passed legislation threatening the very existence of home ownership for millions of Americans in every state. Beginning nationwide with St. Charles Parish, Louisiana, FEMA handed out $23,000 flood insurance premium estimates to hundreds of homeowners, many of whom left in tears and disbelief. At a March 25 town hall, 1,200 homeowners turned in their house keys as a symbol of what could be expected if things did not change. FEMA’s response was build higher, move, or pay up.
Of the roughly 8,500 policies increasing in St. Charles Parish you’d be hard pressed to find someone who didn’t build to code at the time of construction. They followed the law, built high, paid their premium, and never flooded. FEMA’s response? You might flood in the next 100 years, so we need to charge you more. FEMA’s definition of more? 1,000-3,000 percent increases that force homeowners to pay premiums totaling the entire value of their home in 8-10 years. Does it make sense? No. Has the flood risk increased by 3000 percent? No. Protecting these homeowners who followed the law can only be done by putting grandfathering back in and delaying BW12.
The banking industry says for every $1,000 in higher premiums the amount a potential homeowner can borrow reduces by roughly $13,000. Someone with an anticipated $8,000 premium just had their American Dream downsized by $104,000. 50 percent of St. Charles Parish stands to see an average flood insurance premium of $8,000 annually up from an average of $450.
The Coalition for Sustainable Flood Insurance has stated that the National Flood Insurance Program (NFIP) needs to be reformed and financially sustainable. But the often cited $25 billion debt of the NFIP includes $17 billion in claims resulting from the failure of federal levees during Katrina. That $17 billion is on the backs of the Corps, not innocent Americans, and to claim otherwise is dishonest and unfair. Congress demands this debt to be repaid in 10 years causing the disastrously higher premiums. Imagine if Congress had to repay its $17 TRILLION in debt in 10 years with no new debt.
Worst yet, FEMA is still using outdated maps to determine flood risk and price flood insurance. Local governments must now spend precious tax dollars to demonstrate FEMA's data is wrong and illustrate the actual flood risk. St. Charles Parish alone has budgeted $1,000,000 to appeal our FEMA flood maps.
BW12 also changed the method of calculating older flood control structures. Anything not built to current federal standards is treated as if it doesn't exist. In the case of St. Charles Parish, a 90 year old levee is completely removed from the flood map. Take the flood control features away and a house that was considered above flood elevation is now six feet under (pun intended).
As premiums rise, the real estate market stalls and values plummet. If Americans lose their homes, schools lose students. Businesses lose employees, and local government loses taxes. Ironically, as people foreclose, the NFIP loses policy holders and the program gets more in debt.
As the administrator of a local government in Louisiana, I'm not alone. Every state floods. If Congress doesn’t vote on the HFIAA, the keys handed over by St. Charles residents won’t be a symbolic act, but will be the start of a tidal wave of home foreclosures around the nation.
Is that the modern version of the American dream?
Boe is chief administrative officer of St. Charles Parish, La.