Builders, realtors demand reforms to flood insurance program

by Ryan Smith05 Jul 2016
Extreme flood insurance rate hikes and shoddy floodplain mapping are driving up the costs of homeownership and wreaking havoc on home values, industry organizations told Congress last week.

Congress is working to reauthorize the National Flood Insurance Program. But home builders and real estate professionals insist that the program in its current form is in desperate need of reform.

Randy Noel, second vice chairman of the National Association of Homebuilders, told the Senate Committee on Small Business and Entrepreneurship Thursday that the NFIP would be workable if practical changes and reforms were enacted.

“However, has Congress works to reauthorize the NFIP program by the September 2017 deadline, it must guard against the exorbitant rate hikes and faulty floodplain delineations that have plagued the program in the past,” Noel said.

The NFIP’s current problems started in 2012, when Congress enacted the Biggert-Waters Flood Insurance Reform Act to ensure the program’s fiscal soundness. One of the unintended consequences of the legislation was to trigger an immediate shift to charging homeowners full-risk rates over four years.

“Home builders live and work in their communities. We see the effects of flood insurance rate increases in our personal and professional lives,” Noel said. “One Louisiana buyer bought a home only to realize their flood insurance rates had increased from $400 annually to the full-risk rate of over $13,000.”

And David McKey, vice chair of the National Association of Realtors’ insurance committee, said that even the price increases to reach the full-risk rate aren’t the end of homeowners’ fiscal worries. In order for homeowners and businesses to prove that they’ve reached that rate, they have to hire a licensed surveyor and provide the Federal Emergency Management Agency with an elevation certificate. The homeowner or business can then request a full-risk rating. If that’s not done, their rates keep going up by about 25% each year, leading to what McKey called an “endless escalator” of rising costs.

And rising flood insurance prices are having an adverse impact on home values, Noel testified.

“A neighborhood near my home in St. Charles Parish was fully devalued because of flood insurance rate increases,” he said. “FEMA wouldn’t certify the levee protecting the community because it wasn’t maintained by the U.S. Army Corps of Engineers. After Biggert-Waters was enacted, homeowners in that neighborhood were paying between $12,000 and $17,000 annually for flood insurance. The community mailed FEMA their house keys and told FEMA to keep them because the homes were worthless.”
 

COMMENTS

  • by | 7/5/2016 12:43:11 PM

    Randy Noel needs to get his head in reality. If someone wants to buy a home in a flood plain then they should have to pay the cost of providing flood insurance. Why should the American taxpayer continue to subsidize the NFIP? I don't live in a flood plain yet part of my federal income taxes are used to subsidize those people that CHOOSE to live in a higher risk area. I live in tornado alley and because of the significant increase in storms the past several years my insurance has increased significantly. I live in a higher risk area, yet the American taxpayer isn't subsidizing my insurance coverage.
    Perhaps the changes he wants should be to shift some of my insurance premium burden to the taxpayer!

  • by Soonerpepa | 7/5/2016 12:43:42 PM

    Randy Noel needs to get his head in reality. If someone wants to buy a home in a flood plain then they should have to pay the cost of providing flood insurance. Why should the American taxpayer continue to subsidize the NFIP? I don't live in a flood plain yet part of my federal income taxes are used to subsidize those people that CHOOSE to live in a higher risk area. I live in tornado alley and because of the significant increase in storms the past several years my insurance has increased significantly. I live in a higher risk area, yet the American taxpayer isn't subsidizing my insurance coverage.
    Perhaps the changes he wants should be to shift some of my insurance premium burden to the taxpayer!

  • by ARMtgGal | 7/5/2016 3:37:26 PM

    While I hate this for the homeowner, but the above respondent is correct. The American taxpayers should not be footing the bill for those who choose to live in high risk areas. It's just that, a choice. Choose not to live in a flood plain and save on insurance. I also live in tornado alley and, trust me on this, the governments doesn't help us with our premiums.
    That being said, the flood maps border on ridiculous. We have nearby areas where FEMA did high altitude 'fly overs' and used that to determine the flood plains. Really? You can figure out the elevation from 1000 feet in the air? Oh, and the area is heavily treed too! I'd like to learn that trick. Common sense needs to play a part in this. Of course, we're talking about government bureaucrats, so that is probably not going to happen.

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