Stemming a costly flood
The U.S. Senate has passed a bill to delay the backbreaking impact of a new approach to financing what has become widely mandatory federal flood insurance. Now it's the House's turn to act.
The bad news is that House Speaker John Boehner has suggested that the Senate bill cannot pass the House. The good news, maybe, is that the House will come up with its own approach, given the anguish facing so many homeowners.
But that's not likely to happen unless the House continues to hear from constituents about the damage which the new flood insurance program is ready to inflict on property owners and the real estate business.
The federal flood insurance program clearly needs reform. But the current way the Federal Emergency Management Agency is going about it must change. The agency was told by Congress in 2012 to perform an affordability study before it began raising flood insurance rates. It did not.
It was also supposed to issue new flood-plain maps upon which the new rates were supposed to be based. It has not completed these maps.
Yet FEMA has issued new flood insurance rates that in many cases are 10 times higher than the previous ones. That presents property owners with thousands of dollars in additional annual expense.
This has created a real shock to owners and the real estate business in flood-prone areas - including much of the Lowcountry. As a practical matter, most property owners in areas subject to flooding can only obtain flood insurance from the federal government. Because the insurance is mandated for properties with federally insured mortgages, the potential economic impact is devastating.
Storms like Katrina and Sandy have put the federal flood insurance program in a financial hole because premiums collected from property owners were not sufficient to cover losses. Bipartisan legislation passed by Congress and signed by President Barack Obama in 20012 aimed to restore fiscal integrity to the federal flood insurance pool.
However, that law has not been administered correctly.
The new Senate bill, which passed Thursday by a vote of 67-32, delays the impact of the new rates for two years while Congress and FEMA figure out a path that restores fiscal integrity to the federal flood insurance program at a pace that property owners can absorb over time.
A similar bill is pending in the House Financial Services Committee.
But Chairman Jeb Hensarling, R-Texas, said last year that he opposes the federal flood insurance program. According to Rep. Hensarling, Congress should "get the government out of the subsidized insurance business and transition us to a private, stable insurance system that can keep the promises it makes without borrowing tens of billions of dollars that we do not have."
If Rep. Hensarling can come up with a flood insurance program that works for property owners, relies on private capital and can become law, more power to him. But during the transition to such a program, or in its absence, homeowners and others required to have flood insurance need a bridge that provides a reliable and affordable source.
The Senate bill provides that bridge for at least the next two years. Rep. Hensarling should not stand in its way.
And the South Carolina congressional delegation should make every effort to counter the rising menace of intolerably steep flood-insurance increases.