It took nearly six months, but Congress on Thursday finally passed a bill to undo the mess lawmakers made of the federal flood insurance program by imposing sharply higher premiums for thousands of property owners across the country and Florida, threatening the state’s tenuous housing market.
By a 72-22 vote, the U.S. Senate passed what amounts to a do-over bill that scraps the big rate hikes many primary homeowners faced while still stabilizing the flood insurance program for future disasters, as was Congress’ original intent.
Both U.S. Senators from Florida — Democrat Bill Nelson and Republican Marco Rubio — voted for the bill Thursday.
Because Senate passed the same bill approved by the House last week, the legislation now heads to the White House for President Barack Obama’s approval.
Sen. Johnny Isakson, R-Georgia, said that by voting for the bill, the Senate was “doing the right thing at the right time to correct the unintended consequence of an action of the United States Congress.”
Specifically, the Senate was undoing provisions of a landmark flood insurance reform bill, called Biggert-Waters, which passed in 2012. Sen. Chuck Schumer, D-N.Y., called that law an “irrational Washington force” on Thursday because of how flood insurance was becoming unaffordable for middle-income homeowners and threatening to force them to leave their homes rather than pay the dramatically higher rates.
The Biggert-Waters bill passed overwhelmingly amid a push to patch a $24 billion deficit in the National Flood Insurance Program caused by recovery efforts after Hurricane Katrina and Superstorm Sandy. Conservatives pushed for the reform largely on economic grounds, while environmentalists argued that the changes were needed to make the cost of coastal living more realistic. While lawmakers knew flood insurance premiums would increase, few expected the dramatic hikes that began hitting homeowners when the changes took effect last October.
Without changes, Isakson said he worried about homeowners going without flood insurance, putting themselves and the country at greater risk in dealing with disasters.
If Obama signs bill, 1,000 percent flood insurance rate increases that some property owners confronted in Florida will be capped at maximum of 18 percent a year.
“Thousands of homeowners in Sarasota and Manatee counties can breathe a little easier now,” U.S. Rep. Vern Buchanan, R-Longboat Key, said moments after the bill passed the Senate.
The new law would also ensure that homes that serve as primary residences and were built to meet current flood zone map regulations won’t be reclassified under new flood maps and face far higher premiums. In other words, primary homes will be grandfathered against future flood map changes that threatened to price out many homeowners in coastal communities and along rivers and creeks, even if they had lived their homes for decades while following previous federal guidelines.
Another critical piece of the bill passed Thursday will allow people to sell their primary homes with the lower insurance rates. That reverses the 2012 insurance reform law that required new buyers to pay dramatically higher, “actuarially sound” rates with no subsidy.
Under the 2012 reform law, tenfold increases were attached to the sale of some homes, jeopardizing real estate deals in Florida, Buchanan said.
“The market today is frozen,” Buchanan said in a speech to the U.S. House last week before the flood insurance fix bill passed that chamber.
Even with all the changes, House and Senate leaders say the flood insurance program will become more financially solvent because the new legislation includes a $25 surcharge on flood insurance for most primary homes and a $250 charge for businesses and second homes.
Even though the bill easily passed both the House and Senate, getting it through was not easy. For six months, Florida’s delegation was stymied repeatedly by a host of political problems in their effort to undo the rate hikes. Some Tea Party groups opposed the bill, a key House chairman fought it, and some Democrats had political concerns.
It also became a focal point in a U.S. Senate race in Louisiana, leaving both parties worried about how to gain credit for whatever bill finally emerged. Depending on how the 2014 election cycle goes, both parties see the Louisiana Senate as key in deciding which party will run the Senate next year.
“This subject is complicated, it is difficult and there are strong feelings on all sides,” said U.S. Sen. Mary Landrieu, D-Louisiana. “So this was not an easy negotiation.”
In fact, Thursday’s vote was in jeopardy most of the day because Sen. Mike Lee, R-Utah, wanted to attach an amendment to ensure that people who own second homes would not be refunded for overpaying for flood insurance since Biggert-Waters passed. If that amendment had been attached, it would have caused the whole bill to go back for another vote in the House, creating yet another delay.
Because the Senate was trying to bring the legislation up without going through the regular committee process, the vote required that no one in the Senate to object to the bill being brought up. An objection by Lee would have precluded a vote on the bill.
But Lee relented on the condition that his proposed amendment be voted on separately. It passed and now goes to the House for a potential vote later.