Even before Superstorm Sandy hit Long Island’s shores, the federal government put into motion a sweeping change to flood insurance regulations that has proven to have a major financial impact on homeowners in coastal communities.
Over the past week-and-a-half, the U.S. Congress has passed bills that will delay the most financially onerous provisions of the Biggert-Waters Flood Insurance Reform Act of 2012, which was signed into law in the summer of 2012, nearly four months before Sandy struck our shores.
Biggert-Waters had initially required that all new insurance policies be based on the true flood risk for each individual property, causing insurance companies to require homeowners to get an elevation certificate from a surveyor to prove how high their home is. Previously, flood insurance rates were set based on neighborhood flood zones that were not as precise as individual surveys.
Over the past year, some homeowners found these changes meant exponential increases in their flood insurance rates.
Under the original Biggert-Waters Reform Act, FEMA gave an example that a $250,000 building and contents policy for a house in the high-risk AE flood zone that had previously cost $3,600 per year, regardless of whether that property was four feet below or four feet above the “base flood elevation”, the the height above sea level that storm waters are expected to rise in a 100-year flood. Under the rate change proposed in 2012, the property owner whose house was four feet above the BFE would pay about $553 per year, while the owner whose property was four feet below BFE would pay $10,723 per year.
The reforms passed this week would cap any increases under Biggert-Waters to 18 percent per year. The House bill asks FEMA to “strive” for the goal of ensuring policies ultimately cost no more than 1 percent of the value of a property. Properties that were no longer grandfathered into old flood maps that showed them to have a lower flood risk would again be grandfathered in with these new changes.
The House passed the bill, H.R. 3370, on March 4 in a 306 to 91 vote, and the Senate gave the bill final approval in a 72 to 22 vote yesterday, March 13. President Barack Obama is expected to sign it into law.
The reform also ends one of the biggest headaches for new homeowners: the original legislation had ordered an immediate increase to the full value of the property’s flood risk upon the transfer of title of the property. Those increases will now be phased in over the course of several years, and new homeowners who paid for policies last year will receive refunds of their premiums.
Congressman Tim Bishop, an original co-sponsor of the bill, applauded its passage last week.
“This legislation is critical for Long Islanders who live along our coasts,” he said in a statement. “Many have found the cost of flood insurance premiums has risen in a way that makes it difficult to remain in their homes and nearly impossible to sell their homes if they choose to relocate. The relief this bill provides will help to alleviate some of the burden homeowners have felt.”
After the debate on the floor of the Senate, N.Y. Senator Charles Schumer said “this is a good day for shorefront areas of New York…. Flood insurance will now be a friend, once again, and not a foe.”
The money that FEMA will not receive due to the premium reductions will be partially recouped through a surcharge of $25 per year on primary home insurance policies and $250 per year on non-primary home policies.