Groups oppose delaying flood reforms for commercial properties, real estate sales
Under terms of the Biggert-Waters Flood Insurance Reform Act of 2012, long-standing subsidies for some National Flood Insurance Program policies will be phased out over a four-year period. Currently about one in five NFIP policies – 1.1 million overall – pay subsidized rates that are only about 40 to 45 percent of the full-risk rate charged to other policies.
Effective Oct. 1, the program will begin phasing out subsidies for 87,000 commercial properties, as well as 9,000 properties that have been subject to “severe repetitive loss.” Repetitive loss properties comprise about 1 percent of the NFIP’s policies but account for 25 to 30 percent of flood claims. NFIP also started phasing out subsidies for 345,000 non-primary residences earlier this year.
Subsidies will remain in place for another 715,000 properties until they are sold, a policy is allowed to lapse or the property is subject to a claim of larger than 50 percent of its value.
Led by Sen. Edward J. Markey, the delegation seeks to delay a provision that ends premium subsidies for properties that are sold to new owners, as well delaying scheduled rate increases for “small” businesses. Under definitions promulgated by the Small Business Administration, some manufacturing small businesses can have up to 1,500 employees.
“In part because of decades of selling flood insurance at below-appropriate rates, the National Flood Insurance Program is now $24 billion in debt to the U.S. Treasury, and it hasn’t made a single payment against its principle in more than three years,” said R Street Senior Fellow R.J. Lehmann. “The reforms passed by Congress were measured and appropriate, and targeted to fall primarily on those property owners most capable of adapting.”
Steve Ellis, vice president of Taxpayers for Common Sense, added that simply delaying rate increases for certain types of property would not address the problems the delegation members purportedly want to fix.
“If there is an affordability problem, lawmakers should pursue provisions that are means-tested, temporary, and self-funded through a premium surcharge,” Ellis said. “The flood insurance program is broke many times over; undoing or delaying reforms is not going to fix that. But there are responsible approaches that would encourage and help fund mitigation to reduce rates and help policyholders adapt to the real cost of risk. To not do that is unfair to policyholders and most of all unfair to the vast majority of taxpayers who have been stuck with the check.”
Founded in 1995, Taxpayers for Common Sense is a national, non-partisan budget watchdog serving as an independent voice for American taxpayers.
R Street is a non-profit public policy research organization that supports free markets; limited, effective government; and responsible environmental stewardship. It has headquarters in Washington, D.C. and branch offices in Tallahassee, Fla.; Austin,Texas; and Columbus, Ohio. Its website is www.rstreet.org.