WASHINGTON — A bipartisan group of lawmakers Tuesday unveiled legislation that would delay for about four years several changes to the federal government’s flood insurance program that are threatening to sock thousands of people with unaffordable premium hikes.
The move comes as the government is beginning to implement a significant overhaul of the much-criticized program. That overhaul passed last year with sweeping support.
The revamped program was backed by liberals and tea party conservatives but has caused a panic in places like Staten Island, N.Y., and the New Jersey coast and in flood-prone areas of Louisiana, Mississippi and Florida, where higher rates threaten to push some people out of their homes.
Some of the most ardent supporters of delaying the premium increases are conservative Republicans from Southern states, where the new rules have sent some home values plummeting because of uncertainty over insurance rates and because subsidized rates can’t be passed along to buyers. New flood maps threaten to saddle some homeowners who are paying a few hundred dollars a year now with annual premiums of more than $20,000.
“This is a real threat to the economic well-being of many communities,” said Sen. Mary Landrieu, D-La. “There is no state that is exempt from this challenge.”
Last year’s legislation promises premium increases to 1.1 million homeowners who’ve received subsidized, below-risk coverage and could sock even more homeowners whose homes met older building standards or were deemed at lower risk under previous flood maps. Under the old rules, they could retain their old rates since they followed the rules when they bought or built their home, but they will soon lose those “grandfathered” rates under the new law.
“They have followed the rules. They built to the right elevation when they built,” said Sen. David Vitter, R-La. “And yet, through no fault of their own they are facing not just rate increases to make the system solvent, but literally in some cases unaffordable rate increases that could throw them out of their homes.”
“It has dried up the real estate market,” Sen. Bill Nelson, D-Fla.
The new legislation, unveiled Tuesday at a Capitol Hill news conference, would delay the new rates for people purchasing homes from someone who currently has a subsidized policy or people who face higher rates when flood maps are updated. People with second homes or whose property has repeatedly been flooded would still have to pay the higher rates, which are scheduled to rise by 25 percent a year until their premiums reflect the true risk of flooding.
Last year’s law protected subsidies for people who receive them if their houses hadn’t been recently flooded. The new legislation would allow them to transfer the subsidy when they sell their home, thereby propping up home values.
The changes are backed by the real estate industry but drew opposition from supporters of last year’s law.
Supporters of last year’s reforms note that delaying risk-based premium increases means that policyholders in low-risk areas will have to pay higher premiums and that many of the benefits of the program go to higher-income homeowners.
They note that a simple delay gives both wealthy and low-income policyholders equal benefits.