House Passes Flood-Insurance Rate Bill Backed by Realtors

The House passed legislation trimming premiums for government-sponsored flood insurance that proponents say have dampened real estate markets in coastal areas.

Coastal-state lawmakers—backed by banking, homebuilding and real estate groups—say their constituents need relief from premium increases that resulted from 2012 legislation to cut the National Flood Insurance Program's $24 billion debt. Small-government groups say the bill is the latest example of the difficulty in enacting meaningful cuts in federal spending.

The measure passed 306-91.

Proponents said the 2012 law's mandate that the Federal Emergency Management Agency reset premiums at actuarially sound rates has caused unexpectedly steep increases in policies that middle-class homeowners can’t afford.

"Congress never intended to punish responsible homeowners," Mississippi Republican Steven Palazzo said during floor debate. "That is exactly what FEMA is doing as it implements the law with flawed maps and procedures."

The legislation repeals a provision of the 2012 law that triggered premium increases if property were sold to a new owner.

The threat of steep increases is "putting a wet blanket on real estate markets in flood-prone areas" because homeowners can’t find buyers willing to pay higher rates, said New Jersey Democrat Bill Pascrell during debate.

"No matter where you live in the country, some of the premium escalation has been incredible," said West Virginia Republican Shelley Moore Capito, who is running for Senate this year.

"We’ve got a lot of hills and hollows" where flooding is a threat, she said. One homeowner planned to "walk away" from his $150,000 home and face mortgage foreclosure after FEMA notified him his flood-insurance premium would rise from $1,000 to $14,000, she said.

The bill was the product of negotiations between House Majority Leader Eric Cantor, a Virginia Republican, and California Representative Maxine Waters, the top Democrat on the Financial Services Committee.

"The legislation ends dramatic increases caused by events such as property sales" and restores "rates for those who played by the rules and built their properties according to code," Waters said in a floor speech.

House leaders bypassed Jeb Hensarling, a Texas Republican and chairman of the Financial Services Committee, who opposes the bill.

"One of the reasons America is going broke is because of poorly designed and government-run insurance programs," Hensarling said on the House floor. "The program forces 96% of all Americans to subsidize the remaining 4% regardless of income or need."

The measure would limit premium increases to 18% per policy or 15% of an average of premiums in a particular flood zone.

The House bill, H.R. 3370, must be reconciled with legislation passed by the Democratic-controlled Senate that House Republican leaders said would roll back too many of the 2012 law’s changes. The Senate bill is S. 1926.

The small-government groups Club for Growth and Heritage Action for America urged lawmakers to vote against the bill.

"Unfortunately, this shows that House leadership is uncommitted to the limited government reforms that they themselves supported just two years ago," said a statement by Club for Growth.

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