You are using an outdated browser.
Please upgrade your browser
and improve your visit to our site.
Skip Navigation

Congress Passed Flood-Insurance Reform in 2012. Now It's Undoing It.

Brendan Hoffman/Getty Images

Every once in a while, Congress tries to do the right thing by reducing truly wasteful spending or allocating taxpayer dollars in ways that experts believe will be more efficient. But Congress is also very good at undoing its own good deeds. This week the House is preparing to do just that, by passing a new bill on flood insurance.

For decades, FEMA has offered subsidized flood insurance to homeowners in at-risk areas, through a program called the National Flood Insurance Program (NFIP). But recent disasters such as Hurricane Katrina and Superstorm Sandy have bankrupted the program. As of September 2013, FEMA owed the Treasury $24 billion. To fix this, Congress passed the Biggert-Waters Act in 2012. The law eliminated subsidized flood insurance for second homes, vacation homes and businesses—some 438,000 policies in all. For the remaining 738,000 policies that received subsidized rates, most of them primary residences, rates would rise gradually until they hit true market rates. 

Or, at least, that was the plan. Lawmakers from coastal areas got fierce pushback from the homeowners in line for sharp rate hikes—for some, rates would have increased tenfold—and sprang into action. Among those leading the bipartisan charge were Senators Mary Landrieu (La.), Johnny Isakson (Ga.) and Robert Menendez (N.J.). Not surprisingly, all of them hail from coastal states that have a large number of constituents who receive subsidized flood insurance, as you can see from this map, taken from Bankrate:

Flood Insurance Map
Federal Emergency Management Agency

At the end of January, the Senate passed a bill that would delay the rate increases for up to four years, effectively gutting the law. It would also allow homeowners to pass along their subsidized insurance during a sale, something that Biggert-Waters disallowed. This week, the House is taking up its own version of the bill, despite pushback from fiscal conservatives. House leaders have not revealed what exactly it will look like, however.

The original Biggert-Waters bill was nobody's idea of perfect: The rate hikes for many homeowners would have been truly crippling. But there are ways to address those problems without undermining the entire initiative. The Government Accountability Office offered a couple of ways of doing so in a recent report. One suggestion was to means-test the subsidies, so that homeowners who could afford the higher rates would pay them. Another idea was to make the subsidies more explicit, so that homeowners understood the true cost of their insurance. These would help ease the affordability concerns of homeowners without completely undoing the reform of the flood insurance program.

But Congress isn't thinking about any of those changes. The solution on the agenda is to push changes into the future—which means, most likely, the changes won't happen and the flood insurance program will remain as troubled as it is now.