In the last issue of Realty/Builder Connection, I shared my concern about the flood insurance reform bill that, until this month, floated around in Congress while homeowners in Florida and other coastal states faced the threat of enormous premium increases of $2,000 to $10,000.
In the first week of March, the House voted 306-91 to dismantle significant requirements of the 2012 Biggert-Waters Insurance Reform Act, which took effect last October.
Biggert-Waters previously passed the House and Senate with overwhelming support, intended to eliminate subsidies on two kinds of homes — those built before flood maps existed and those that face increased premiums when a new map put them at a higher flood risk.
In reality, the legislation sent premiums soaring and jeopardized a slowly recovering housing market.
The recent House action to undo Biggert-Waters was not only a win for homeowners and Realtors, but it was also a political victory for Gov. Rick Scott who pushed hard for change.
During a re-election year, Scott aggressively used flood insurance reform to raise his profile, including landing a personal meeting with President Barack Obama.
Fearing that the House would not act, Scott pressed the president to take action. Florida has been hit in recent years by several hurricanes that caused billions in damage. But it's been two decades since the state has seen the level of devastation similar to what Hurricane Katrina left behind in Louisiana or Superstorm Sandy caused in New Jersey.
Because of that, many Floridians may not have seen the impact the legislation would have on them. But, Scott knew better and he worked hard to ensure Florida was protected.
With more than 2,275 miles of tidal shoreline, Florida could have as many as 250,000 properties facing huge rate hikes and could face more subsidized flood insurance policy rate hikes. That's more than any state in the country.
Getting rate reform is good policy and good politics for the governor.
In a statement Scott said, "For too long, Florida has been a donor state to the National Flood Insurance Program by contributing $16 billion over the last three decades, which is nearly four times the amount Florida homeowners have received back in claims."
He makes a good point. It's an undeniable fact that Floridians are paying a high price for Katrina and Sandy.
Now that there is a solution within grasp, Scott should get some credit.
The governor urged the president "to use his pen and stop these unreasonable, unfair increases."
Scott said Obama has the power to stop the Federal Emergency Management Agency from implementing changes that are driving higher rates. Obama said he expected Congress to act.
Scott also lobbied House Speaker John Boehner, who supported reform, but felt the Senate bill was insufficient.
"The Senate bill, in my view, doesn't really solve the problem," the speaker said in a news conference. "And I do think the effort that is underway is a serious effort, a practical effort to soften the impact of these changes."
At first, Boehner refused to take up the bill. Near the end of February, he seemed to change his mind, only to change it again because of what he called "unintended consequences."
All of the members of Florida's congressional delegation voted for the bill, with the exception of U.S. Rep. Corrine Brown, who did not cast a vote. Brown is one of the original co-sponsors of the bill and previously supported it when it passed the House. A spokesman in her office said Brown attended a rally in Tallahassee the day before the vote. Her flight back to Washington was canceled because of bad weather.
In addition to eliminating federal subsidies for homes built before federal flood maps were drawn, the Biggert-Waters Act was to discourage building in risky areas and stabilize the National Flood Insurance Program which is $24 billion in debt.
Many Republicans want to pay down that debt.
House conservatives pushed and won a $25 annual assessment on primary residence policies covered by the program, along with a $250 assessment for businesses and secondary residences, with the money going into a reserve fund.
Another hang-up about the Senate bill is that it eliminates a provision of the 2012 law that does away with subsidized rates when a person sells a primary home.
Experts say this is confounding the real estate market. New buyers are shocked to learn they owe thousands more than they expected, and it has caused some potential homebuyers to back off.
The important steps the House and Senate have taken the first quarter of 2014 are rare acts of bipartisanship.
Now, we need quick negotiations by both chambers to finish the job and get the bill to the president so Floridians can get relief from this unfair economic catastrophe that could be devastating to homeowners as well as homebuyers in this state.
— Jim Bailey is publisher of Realty/Builder Connection and president of Bailey Publishing & Communications Inc. He can be reached at [email protected].