WASHINGTON — After months of grinding negotiations over the future of the National Flood Insurance Program, lawmakers return to Capitol Hill on Monday with less than two weeks before the program expires.
Despite progress in the U.S. House of Representatives before Congress split town for its Thanksgiving break, deep and longstanding divisions remain over the federal program, which is heavily in debt and now facing billions in claims from victims of a spate of destructive hurricanes this year.
Members of Congress and those keeping a close eye on the flood insurance debate are increasingly expecting the Dec. 8 deadline to come and go without a comprehensive, long-term reauthorization for the program.
Instead, most are now hoping for a shorter deal to temporarily extend the program — possibly for six months or a year — to buy more time for negotiations on a more comprehensive set of reforms.
That's what Congress did in September with a three-month reauthorization. Lawmakers at the time said they hoped to pull together a deal by December — but there's now little indication they're much closer, despite the House vote.
Senators have shown little interest in taking up a flood insurance bill passed on Nov. 14 by their colleagues in the House. The bill was the product of a hard-fought compromise between House Majority Whip Steve Scalise, R-Jefferson, and Rep. Jeb Hensarling, R-Texas, a fiscal hawk and the bill's primary author.
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"It's a good start," said Sen. John Kennedy, R-Madisonville, "But I think we (in the Senate) can do better in terms of helping the average policyholder."
Sen. Bill Cassidy, R-Baton Rouge, called the House's bill "a step in the right direction" but didn't indicate any plans to support it in the Senate.
Both Cassidy and Kennedy are co-authors of separate bills currently sitting in committee. The committee chairman, Republican Sen. Mike Crapo of Idaho, also authored a third NFIP reauthorization bill.
But there's been little public indication of progress toward passing a bill so far in the Senate. A jammed December schedule — with frenzied negotiations over GOP-backed tax cuts and a spending deal needed to avoid a government shutdown — might make it difficult to hammer out a sweeping deal on the program.
Caitlin Berni, vice president of policy and communications for Greater New Orleans Inc., viewed House passage of the bill as a positive sign toward a full reauthorization that'd be kind to Louisiana homeowners.
"Coming out of the House, we always knew we were going to have to get the bill to the least-bad position possible because of the position (Hensarling) has had on the NFIP," Berni said, whose group helped organize a coalition to lobby on flood insurance issues. "We’ve got a much friendlier position toward policyholders in the Senate and I think we’ll get a good package."
Earlier drafts of Hensarling's bill would've immediately jacked up rates for homeowners whose properties had flooded more than once in the past while booting others from the program. Hensarling, a longtime critic of the NFIP, has denounced its current structure as fiscally unsustainable.
The proposals sparked concern from many in Louisiana and other flood-prone areas, where property owners depend heavily on the program.
Many in Louisiana pay below-market rates for flood insurance coverage under a provision known as "grandfathering," which bases premiums on a building's flood risk at the time of construction instead of accounting for rising risks since.
Scalise's deal with Hensarling softened a number of the bill's provisions, especially those aimed at multiple-loss properties — buildings that've flooded more than once.
The revised bill passed by the House would strip grandfathered rates after two future claims, with rates then rising 10 percent per year until hitting the current risk-rate. A third claim would see rates ratchet up at 15 percent per year.
Hensarling’s original bill would have counted all past NFIP claims — including those filed by prior owners decades ago — against a property’s grandfathered status and hiked rates faster.
Many homes in south Louisiana have already flooded at least once in the past, including tens of thousands of homes in Hurricane Katrina and last year's Baton Rouge-area floods.
But despite the concessions won by Scalise, the deal split Louisiana's congressional delegation. Half the state's six congressmen — Reps. Garret Graves, R-Baton Rouge, Cedric Richmond, D-New Orleans, and Ralph Abraham, R-Alto — voted against the bill because of its impact on homeowners.
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"This bill pays for the program on the backs of those who have played by the rules without making strong enough reforms to increase participation and mitigate flood risk," Abraham said.
Graves, who also testified at a House hearing against the bill, said the bill's reforms to the flood insurance program would do little to shore up the NFIP's finances but would end up hitting Louisiana homeowners hard.
"I hope the Senate eviscerates this bill," Graves said. "It’s awful policy from a financial perspective and a fairness perspective, especially to Louisiana."
Graves and a number of other flood insurance advocates have pushed to expand the program's pool of policyholders as a way of broadening the insurance risk pool and bringing in more premium dollars to pay claims.
The House bill would do the opposite, Graves said, by jacking up rates to unaffordable levels.
Graves also said a comprehensive reform of the program should include far more money for flood-prevention and mitigation work, something the congressman said would end up paying for itself by avoiding future claims.
Including money for levee projects and other flood mitigation work, however, would likely require a much broader effort in Congress because separate committees have authority over the NFIP and agencies like FEMA and the U.S. Army Corps of Engineers.
How to handle grandfathered properties has long been a core conundrum for those looking to reform the program. The subsidized, below-risk rates mean premiums for grandfathered properties are unlikely to fully cover the odds of a claim.
The 2012 Biggert-Waters Flood Reform Act had targeted grandfathered rates for elimination with a number of mechanisms designed to hike premiums to reflect a property's actual risk of flooding.
But the jaw-dropping potential premium increases some homeowners began to see — including many in south Louisiana — prompted outrage and Congress largely scrapped the Biggert-Waters reforms before they went into effect.
In a floor speech against the latest reform bill, Richmond said the legislation passed by the House was better than Biggert-Waters — but still not good enough.
"We were talking about paying 20 percent of the value of your home in flood insurance every year," he said. "It was going to cause more families to turn in the keys to their house and just give their homes back to the mortgage company or declare bankruptcy so they can just get by."
Some fiscal conservatives like Hensarling have railed against the NFIP as an unsustainable government handout. A number of environmentalists, meanwhile, have argued that the NFIP's subsidized rates encourage people to build — and rebuild — in wetlands and other high-risk areas.
But while hiking premiums and booting folks out of the program might improve the program's balance sheet going forward, it'd have a potentially devastating impact on homeowners in high-risk areas.
In Louisiana, roughly 500,000 homeowners pay grandfathered, below-risk rates, said Rick Haase, president of the New Orleans-based real estate company Latter & Blum.
Some of those families would find themselves unable to afford to stay in their homes if their flood-insurance premiums rose to risk levels, said Haase, but they'd be in a potential bind when they turned around and tried to sell.
Dramatically higher premiums — or no access to NFIP coverage at all — would significantly decrease a home's value, Haase said. For homeowners with mortgages and little equity, a sudden change to NFIP rates could leave them underwater, owing more to the bank than the home is worth.
"When you talk about the impact on Louisiana property owners, it’s the equity that’s been building up for years that can be destroyed very quickly," said Haase. "You’re talking about destroying significant portions of a person’s net worth."
Haase said one of his key concerns about reforms to the NFIP is how quickly grandfathered rates might rise. Rapid hikes, Haase said, would wipe out home values quicker and potentially leave some people trapped, unable to afford the premiums and unable sell their homes for the amount they still owe.
For some coastal communities in Louisiana, it could also spell a slow doom.
"If this isn’t handled right, you’ll see a slow and steady migration out of (a high-risk) community," Haase said. "In the long run, the people who can afford to leave will leave. It's the slow creation of new ghost towns."
For most of Louisiana's lawmakers, eliminating grandfathered rates also goes against a sense of fairness. Most grandfathered homes were built at or above what FEMA considered a safe elevation at the time.
The risk of flooding has risen for many homes in south Louisiana for a variety of factors — coastal erosion, wetlands development, new construction and global warming.
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Graves, in an interview just before the Thanksgiving break, argued that, because those changes aren't a homeowner's fault, it'd be fundamentally unfair to wipe out their home equity and hit them with much higher premiums.
Doing so, several Louisiana members of Congress have argued, would be like changing the rules in the middle of a game.
"When you have people who played by the rules, bought the home of their dreams, you don’t change the rules halfway to say, ‘Hey, we know this was the rule when you bought the house but now it’s changed and all of a sudden that $500 in insurance you pay a month is now $1,500,'" said Richmond. "That’s not responsible, that’s not fair."
Instead, Louisiana lawmakers have pitched ideas for bringing in more policyholders to the program, including stepping up enforcement of rules requiring homeowners in high-risk flood areas with federally backed mortgages to buy coverage.
Kennedy's bill would slash the fees paid to companies who sell and manage policies, while both Louisiana senators want to improve mapping to better reflect flood risk....Read more