Now that Congress has settled the ugly dispute that ground federal government to a standstill, state leaders like me are looking for Washington to fix the burgeoning nationwide problem of skyrocketing flood insurance costs, a little-noticed situation that has huge consequences for homeowners nationwide and the still-fragile national economy.
Following the deadly and costly super-storms of Katrina and Sandy of the last decade, Congress felt compelled to reform federal guidelines with respect to flood insurance. Unfortunately, the changes, in the form of the 2012 Biggert-Waters Flood Insurance Reform Act, end the federal subsidies for flood insurance and increase rates sometimes dramatically, perhaps by 25 percent on average. To make matters worse, these alterations are simultaneously taking place as a routine redrawing of flood maps. While the new paradigm is still taking shape, early reports suggest that changes could suspend progress in the housing market, in many localities, and send it reeling back to the dark days of the 2008 real estate downturn.
One of my colleagues in the Massachusetts House, Rep. James Cantwell, uncovered an example of a homeowner seeing their flood insurance going to $68,747 from $16,000 in one year; FEMA ultimately revised the cost. A local realty company, Jack Conway & Company, provided multiple reports of potential buyers leaving deals when confronted with new astronomical flood insurance rates. The changes, as implemented, are excessive and uneven.
Carol Bulman, president of Jack Conway & Company, went so far as to suggest that the new rules would irrevocably change the demographic makeup of coastal communities: “We face the very real possibility that only the wealthy will be able to afford to purchase homes in flood zones – not just the large houses on the beach, but even more modest Capes and Ranches that border marshes, ponds and small rivers.”
I’m also concerned that the rates will force financially-strapped existing homeowners to choose between paying their mortgages or flood insurance. It’s an unfortunate irony of this new arrangement that homeowners may fall financially underwater in order to pay flood insurance.
Earlier this month, Attorney General Martha Coakley and I offered state legislation that limits the amount of mandatory flood insurance for Massachusetts homeowners. If passed, the bill will cap the flood insurance rates resulting from new FEMA maps. Our legislation blocks creditors from forcing homeowners to carry more flood insurance than the outstanding balance on their mortgages, but includes a strong notice requirement so that homeowners understand the risks of underinsuring or self-insuring.
And, in September, I appealed to FEMA Administrator William Fugate and the Massachusetts congressional delegation, asking them to modify the program.
We are fortunate that Massachusetts congressional delegation has weighed in calling for change. Rep. Maxine Waters, a co-sponsor of Biggert-Waters, is now in support of a timeout on the implementation of the law until many of these affordability concerns can be addressed.
Fortifying the nation’s emergency flood insurance program is an essential endeavor that I wholeheartedly support. But these sweeping changes inject too much uncertainty into the housing market and could inflict too much pain on property owners.
In Massachusetts, we will move forward with the state flood insurance measure I introduced. But we understand this is only a stop-gap measure. We can only do so much on the state level. The real action must come from our leaders in Washington. Only they can address complex national problems that stem, in part, from our unwieldy federal bureaucracy. It is their turn to act.
Robert A. DeLeo is speaker of the Massachusetts House of Representatives.