The Senate next week will try to advance legislation to amend parts of a 2012 flood insurance reform law that was aimed at making the National Flood Insurance Program (NFIP) financially viable.
Senators will consider S. 1926, the latest iteration of a bill put forward by Sen. Robert Menendez (D-N.J.) in an effort to mitigate the impact of the 2012 law on vulnerable homeowners.
Members of Congress estimated that low insurance premiums had created an $18 billion debt over the last few decades.
To bring the NFIP back into the black, the 2012 law required the government to stop providing insurance discounts to homeowners and businesses. It phases out subsidies given to homes built before 1975, before federal flood maps were developed to assign flood risks, and to homes built to code that have fallen out of compliance due to updated flood mapping.
But Menendez and other supporters of his bill, which include nine Senate Republicans, say the 2012 law had unintended consequences that need to be corrected.
First, the bill would delay language that would immediately eliminate flood insurance subsidies for homes built before 1975 upon the sale of those homes. An aide to Menendez said their office has heard several complaints that this property sales trigger is making it difficult to sell homes, because prospective buyers know they will not get the same flood insurance subsidy.
The bill would delay this trigger until the Federal Emergency Management Agency (FEMA) does an affordability study, which would provide more information about how homeowners might be affected by this change. FEMA would also have to certify that its flood maps are accurate, a process that FEMA has said could take three years.
Secondly, the bill would restore language that lets people continue to pay a lower insurance premium if they are put into a flood zone for the first time, or are put into a higher-risk flood zone. The 2012 law required these people to pay the higher rate, which would be phased in over five years, but supporters of the Menendez bill say they have again heard complaints about the affordability of this change.
The requirement to pay the higher rates — instead of the grandfathered rates — would also be keyed to the completion of FEMA's affordability study.
Earlier this month, both the House and Senate approved an omnibus spending bill that delays the phase-out of the grandfathered rates until October. But that change was seen as minimal, as FEMA was not expected to implement that change until October at the earliest.
Last year, Menendez said the termination of subsidies and grandfathered rates needs to be delayed until more is known about how hard these changes will hit people, and how many people they will hit.
"Without action, the combination of new flood maps, phase out of premium subsidies and grandfathered rates for the National Flood Insurance Program will force thousands of homeowners to pay premiums they simply cannot afford, forcing them to either sell or abandon their homes," he said. "These are hardworking middle class families, who played by the rules and purchased flood insurance responsibly.
"We must stop this manmade disaster from doing more damage, take a time-out and assess the impact these premium hikes will have on homeowners and the communities they live in."
The bill's requirement of a FEMA affordability study is meant to help policymakers understand how widespread the changes would be. But an aide to Menendez said it would also give Congress a chance to assess whether other steps are needed to help people with the rate hikes.
Both the House and Senate have had some discussions about whether the bill should allow FEMA to issue its own regulations to help mitigate the impact of higher rates. Today, FEMA is not authorized to write its own regulations on affordability.
An earlier version of the Menendez bill would have set up an expedited process within Congress for authorizing FEMA to propose affordability regulations — a fast-track procedure requiring an up or down vote, with no amendments. But the Menendez aide said Senate Republicans opposed this idea, in part because of the broader fight they're having in the Senate about their inability to amend Democratic legislation.
The newest Menendez bill removes this expedited procedure, but would still let Congress authorize FEMA to write affordability regulations later if it wants.
The aide to Menendez said if the bill were passed into law, ideas about affordability of new flood insurance rates could be included in legislation to reauthorize the NFIP, something that will need to be done a few years from now.