SMARTERSAFER.ORG: CONGRESS MUST IMPLEMENT FLOOD INSURANCE REFORMS AS PLANNED

Coalition Says Delays To Biggert-Waters Flood Insurance Reform Act Would Force Taxpayers to Continue to Bail Out a Flawed Program

WASHINGTON D.C. – SmarterSafer.org today called on Congress to resist delaying reforms to the National Flood Insurance Program (NFIP) required under the Biggert-Waters Flood Insurance Reform Act of 2012.

In a letter to the Senate Banking Committee – whose members will take up the matter this week – the group stressed that while affordability concerns should be addressed in full, rolling back NFIP reforms was the wrong approach.

The SmarterSafer.org letter stated: “NFIP remains almost $28 billion in debt to US taxpayers as a result of years of heavily subsidized premiums regardless of need. Not only have subsidized premiums resulted in a huge burden to US taxpayers, but these subsidies have incentivized development in environmentally sensitive and flood-prone areas which would otherwise provide natural buffers and reduced risk to storms– resulting in even greater losses.”

The letter detailed the disproportionate benefits NFIP provides to the wealthy, noting that “43 percent of subsidized properties are located in counties that have average home values in the top ten percent of the country—these counties have the highest home prices in the nation.”

Rather than subsidizing the rich, SmarterSafer.org said in the letter that the program should do more to support those of modest means.

“Congress should not delay the phase out of subsidies but should instead address affordability through targeted, means-tested, and temporary assistance outside of the rate structure and paid for within the program to address affordability challenges of affected low-income households. In addition, mitigation assistance could be provided and should be prioritized for low-income policy holders affected by rate increases and most in need of financial relief.”

The letter concluded by urging Congress to concentrate on protecting properties that have suffered consistent flooding losses “as opposed to continuing to subsidize people to live in the face of persistent danger.”

The Senate Banking Committee’s Subcommittee on Economic Policy will take up the issue at a hearing this week.

A copy of the full letter is below:

September 16, 2013

The Honorable Tim Johnson
Chairman
Banking, Housing, and Urban Affairs Committee
136 Hart Senate Office Building
Washington, DC 20510

The Honorable Mike Crapo
Ranking Member
Banking, Housing, and Urban Affairs Committee
239 Dirksen Senate Office Building
Washington, DC 20510

Dear Chairman Johnson and Ranking Member Crapo:

SmarterSafer.org—a coalition of leading environmentalist groups, taxpayer advocates, insurance industry interests, and mitigation and housing organizations—is opposed to recent efforts to roll back reforms to the National Flood Insurance Program (NFIP), which passed Congress with overwhelming support just last year. Though we understand that there are communities that are concerned about increasing flood insurance premiums, rolling back common sense, needed changes to the bankrupt program is not the answer. However, we do agree that FEMA must ensure maps are accurate, and if affordability issues continue to exist, Congress should address the problem with a targeted solution. If flood insurance subsidies are not phased out, NFIP will continue to be bailed out by US taxpayers—95 percent of whom do not participate in the program.

NFIP remains almost $28 billion in debt to US taxpayers as a result of years of heavily subsidized premiums regardless of need. Not only have subsidized premiums resulted in a huge burden to US taxpayers, but these subsidies have incentivized development in environmentally sensitive and flood-prone areas–areas which would otherwise provide natural buffers and reduced risk to storms– resulting in even greater losses. To address the major debt and structural problems in NFIP, Congress passed the Biggert-Waters Act last year to put the program on a sustainable path. Delaying Biggert-Waters will place NFIP itself and taxpayers at continued risk. Continued borrowing from Treasury, at the expense of most Americans, is not sustainable or desirable in the long-run.

Biggert-Waters protected primary residences from rate increases except in areas that are newly mapped or when a home is sold. We understand that much of the concern about Biggert-Waters is being raised about properties in newly mapped areas. Though SmarterSafer is opposed to efforts to continue subsidizing properties at risk of flooding in perpetuity regardless of need, we do share concerns raised by communities that maps be correct and take into account levees that no longer provide protection from a 100 year flood. As we advocated during the debate over Biggert-Waters, even decertified levees provide some level of protection and that should be taken into account when determining rates. SmarterSafer urges FEMA to ensure that maps are up to date, accurate, account for elevation of individual structures, and give proper credit for all existing flood control structures. Congress should not delay the phase out of subsidies but should instead address affordability through targeted, means-tested, and temporary assistance outside of the rate structure and paid for within the program to address affordability challenges of affected low-income households. In addition, mitigation assistance could be provided and should be prioritized for low-income policy holders affected by rate increases and most in need of financial relief.

We urge Congress not to delay the implementation of Biggert-Waters, but rather work to ensure that those most at risk can mitigate their risk. US taxpayers cannot afford to subsidize insurance premiums regardless of need. According to GAO, 43 percent of subsidized properties are located in counties that have average home values in the top ten percent of the country—these counties have the highest home prices in the nation. Properties located in areas within the lowest decile of home values contain only 1 percent of subsidized properties. This makes clear that a solution to deal with affordability can and should be much more targeted than current efforts to maintain subsidies regardless of need, and should focus on those who truly cannot afford increased rates.

SmarterSafer urges Congress to look at supporting mitigation as a way to not only address rising flood insurance premiums, but as a way to better discourage further development in and protect those already in risky areas. Some of the rates being discussed in the press and by FEMA indicate that some NFIP policyholders are at risk of flooding every 10 years or even more. It is critical that the Committee review this information and understand the universe of properties at risk of flooding so frequently. For a home that is likely to flood and sustain a total loss once a decade (or even once every 20 years), SmarterSafer urges Congress and FEMA alike to focus more on mitigating that risk as opposed to continuing to subsidize people to live in the face of persistent danger.

We look forward to working with you on this important issue.

Sincerely,

SmarterSafer.org