March 14, 2014 — President Obama is set to sign a new bill passed by the Senate and House that rolls back planned flood insurance increases. The National Association of Home Builders (NAHB) welcomed the Homeowner Flood Insurance Affordability Act, saying: “Flood insurance legislation will provide much-needed certainty to home owners and financial stability for the National Flood Insurance Program (NFIP).
Home builders believe the reform will provide an important boost to home building and remodeling. People who own homes affected by the 2012 Biggert-Waters Flood Insurance Reform Act are relieved that they will not have to face huge premium spikes and impacts on the sale, construction and remodeling of their homes.
The legislation provides a more affordable rate structure for policyholders; repeals the requirement that flood insurance premiums increase immediately to full actuarial rates for homes that are sold; and restores “grandfathering” for properties that were paying premiums applicable to their initial flood risk rating, allowing owners to pay premiums based on the original risk zone rather than updated flood risk zones.
Not Everyone is Celebrating
Not everyone is as pleased with the new law. The Associated Press reported that Steve Ellis, vice president of Taxpayers for Common Sense, a Washington-based watchdog group said of it: “While politically expedient today, this abdication of responsibility by Congress is going to come back and bite them and taxpayers when the next disaster strikes.” He went on to say that this new law is not economically viable over the long term.
Not everyone is covered by the new law. Multiple apartment units, people who have had multiple claims in the past, and some others will not get relief.
What you should know about this law
If you own a home in a flood zone that is affected by this law, it looks like you have gotten at least some temporary relief from crippling rate increases. Think about rebuilding above the flood zone if you can; in the long run it will probably be cheaper than paying market rates. If you are contemplating buying a home in or near a flood zone, make sure you know exactly what you are getting into. Eventually flood insurance rates will be actuarially sound – so today’s rates might not always be so low.
Comments: Have you been affected by the Biggert-Waters bill and subsequent changes? Please share your experiences in the Comments section below.