WASHINGTON — President Barack Obama is set to sign into law a bipartisan bill relieving homeowners living in flood-prone neighborhoods from big increases in their insurance bills.
The legislation, which cleared Congress on Thursday, reverses much of a 2012 overhaul of the government’s much-criticized flood insurance program after angry homeowners facing sharp premium hikes protested.
The Senate’s 72-22 vote sent the House-drafted measure to Obama. White House officials said he’ll sign it.
“I’m ecstatic,” said Terrilyn Tarlton, a Galveston City Councilwoman who has been one of many local government and business leaders pushing for Congress to help policyholders. “I’ve been on cloud nine.”
The bill would scale back big flood insurance premium increases faced by hundreds of thousands of homeowners. The measure also would allow below-market insurance rates to be passed on to people buying homes in flood zones with taxpayer-subsidized policies.
Critics say Washington is caving to political pressure to undo one of the few recent overhauls it managed to pass.
“While politically expedient today, this abdication of responsibility by Congress is going to come back and bite them and taxpayers when the next disaster strikes,” said Steve Ellis, vice president of Taxpayers for Common Sense, a Washington-based watchdog group. “Everyone knows this program is not fiscally sound or even viable in the near term.”
But Tarlton, who owns an insurance business on the island, said coastal states such as Texas were mischaracterized as taking advantage of subsidized rates. Texas and its policyholders have paid more than enough in premiums to cover all claims, while other states with fewer policyholders have taken more than their fair share of flood insurance payouts.
Cruz vote a ‘big deal’
Tarlton was one of several coastal officials who lobbied members of Texas’s congressional delegation to pass the bill. Among those lawmakers was U.S. Sen. Ted Cruz, who voted for the bill.
Getting Cruz’s vote “was not necessary to get the bill passed, but it was a big deal for us,” Tarlton said.
The hard-fought 2012 rewrite of the federal flood insurance program was aimed at weaning hundreds of thousands of homeowners off of subsidized rates and required extensive updating of the flood maps used to set premiums. But its implementation stirred anxiety among many homeowners along the Atlantic and Gulf coasts and in flood plains, many of whom are threatened with unaffordable rate increases.
The legislation offers its greatest relief to owners of properties that were originally built to code but subsequently were found to be at greater flood risk. Such “grandfathered” homeowners benefit from below-market rates that are subsidized by other policyholders, and the new legislation would preserve that status and cap premium increases at 18 percent a year.
The top leaders of both parties came on board, overcoming resistance from defenders of the 2012 overhaul such as House Financial Services Committee Chairman Jeb Hensarling, R-Texas, whose turf was trampled along the way.
“Members on both sides of the aisle and a broad geographic distribution got involved. And when you get enough members involved, it’s going to get the attention of the leadership, and that was a major factor,” said Rep. Charles Boustany, R-La.
Another provision, eagerly sought by the real estate industry, would allow sellers of older homes built before original flood insurance risk maps were drafted to pass taxpayer-subsidized policies on to the people buying their homes instead of requiring purchasers to pay actuarially sound rates immediately, as required by the 2012 law.
The measure also would give relief to people who bought homes after the changes were enacted in July 2012 and therefore faced sharp, immediate jumps in their premiums; they would see those increases rolled back and receive rebates. Separate legislation by Sen. Mike Lee, R-Utah, would make sure that rebates would not go to recent buyers of beach houses and other second homes. It passed the Senate on Thursday and is likely to get a vote in the House.
‘It’s just a delay’
While the bill is a relief to policyholders, Tarlton cautioned against becoming complacent.
“This is not over; it’s just a delay,” she said. “The time to start working is right now.”
Tarlton said Galveston must start work immediately on projects that can earn policyholders discounts through the National Flood Insurance Program’s Community Rating System. Under the system, cities can earn up to a 45 percent discount for policyholders through better flood mitigation projects, improved building codes and education projects.