REALTORS® this week applauded the House passage of a bipartisan flood insurance bill that would block dramatic increases in premiums paid by some property owners under the National Flood Insurance Program (NFIP). The Homeowner Flood Insurance Affordability Act, H.R. 3370, passed overwhelmingly by the U.S. House on Tuesday.
National Association of REALTORS® (NAR) president Steve Brown said the bill is "a responsible and balanced solution" to the dramatic flood insurance rate increases unintentionally triggered by the Biggert-Waters reforms to the National Flood Insurance Program.
"As the leading advocate for homeownership and housing issues, NAR applauds this bill, which protects homeowners from the drastic premium increases that went into effect on October 1, 2013, and holds the Federal Emergency Management Agency accountable for any flood insurance policy changes," said Brown.
The bill comes in response to public outcry from thousands of homeowners who faced sharp increases in flood insurance rates mandated by the Biggert-Waters Flood Insurance Reform Act of 2012. That law was passed by Congress in order to stabilize the nearly bankrupt NFIP by bringing flood insurance rates more in line with the real risk of flooding and putting a stop to homeowners in less risky areas essentially subsidizing below-market insurance rates for homeowners in areas more at risk of flooding. However, thousands of homeowners and even legislators, were caught off guard as the premium increases were astronomical, increasing five to 10 times the previous amounts, affecting property values and home sales. The NFIP is about $24 billion in debt, largely due to claims from Hurricane Katrina and Superstorm Sandy.
The Homeowner Flood Insurance Affordability Act would limit annual increases of any individual policy under the NFIP to no more than 18 percent. The bill also repeals the provision in Biggert-Waters that would have terminated grandfathering. If grandfathering was terminated, property owners mapped into higher risk would have to either elevate their structure or have higher rates phased in over five years.
The bill instructs the Federal Emergency Management Agency (FEMA) to have "an affordability target" that would seek to limit the cost of a flood insurance policy to 1 percent of a home's total coverage amount and removes FEMA's authority to increase premium rates to unjustified levels at the time of a property's sale, which will stabilize local real estate markets and ensure that both property owners and prospective buyers are treated equally. Data from the national Realtor group shows through January 2014, four months into the law's implementation, about 40,000 home sales were estimated to be either delayed or canceled because of increases and confusion over flood insurance rates.
The 306-91 vote by the House follows Senate approval of a similar legislation. The Senate bill would have delayed any rate hikes for four years while FEMA seeks changes. The House version would not delay the hikes, but limits them. No date has been set for a Senate vote, but the legislation already has been publicly endorsed by key senators.
Although much of the news has focused on steep premium increases affecting property owners in coastal areas of Florida, Louisiana and New Jersey, Silicon Valley Association of Realtors president David Tonna said properties in Silicon Valley are affected, as well. "We are optimistic that the Senate will approve the House bill, which was passed with overwhelming bipartisan support. We hope it happens soon to alleviate worry for homeowners facing these increased premiums," said Tonna.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
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