Homeowners in the nation’s flood prone areas got a big break today. President Obama signed the Homeowner Flood Insurance Affordability Act into law, which dramatically slows down the federal government’s effort to end subsidies for the program.
The law was long fought for by coastal homeowners who feared that previous attempts to reform the National Flood Insurance Program, passed by Congress in 2012, would make insurance premiums unaffordable.
“It has been a long and arduous two-year battle to reach today,” said Sen. Mary Landrieu, D-La., one of the law’s main advocates, in a statement.
The legislation caps premium increases at 18 percent a year and reinstates subsidized rates for properties that had begun to be phased out under the 2012 reforms. Those restored subsidies apply to properties which were built in compliance with earlier flood elevation recommendations and ensures that those rates will apply to new homeowners, if a property is sold.
“Over a year ago, I began hearing from constituents, many who came to me in tears, expressing horror stories of skyrocketing flood insurance premiums that threatened to force them from their homes,” said the bill’s original sponsor, Sen. Bob Menendez, D-N.J., in a statement. “The more I listened, the more I was convinced that something needed to be done and done quickly.”
In order to recoup revenue lost to more gradual rate increases, the Homeowner Flood Insurance Affordability Act requires all policy holders to pay an annual fee of $25, or $250 for policies on second homes.
The law also includes language that encourages FEMA, which administers the flood insurance program, to keep premiums below 1 percent of the property’s value.
Despite signing the law, President Obama did not support earlier iterations of the law.
“Delaying implementation of these  reforms would further erode the financial position of the National Flood Insurance Program, which is already $24 billion in debt,” the Office of Management and Budget said on behalf of the White House before a vote on an earlier version of the bill.
The Biggert-Waters Act of 2012 mandated the phasing out of subsidies for homeowners, pushing the program toward market-based rates. But homeowners, especially those still recovering from flooding caused by Katrina and Sandy, argued that rate increases combined with costly repairs, might price them out of their homes. Lobbyists from the real estate and construction industries said that high flood insurance premiums would impact home values.
Opponents of the new law, including taxpayer watchdogs and private insurance industry lobbyists, countered the Biggert-Waters reforms were needed to assure the financial solvency of the National Flood Insurance Program and that all taxpayers shouldn’t be required to underwrite homeowners who choose to live in risky areas. Environmental groups argued that market-based insurance premiums could be a tool to counter bad building policies of the past, by creating financial incentives for people to move away from areas most at risk for flooding.