House-Passed Bill Would Strengthen Flood Insurance Acting to bolster the National Flood Insurance Program (NFIP), the U.S. House of Representatives on June 26 voted 416-4 to approve H.R. 4973, the “Flood Insurance Reform and Modernization Act of 2006.” The measure would boost the program’s borrowing authority from $20.8 billion to $25 billion and would make other changes to reduce the need for future borrowing. The Federal Emergency Management Agency (FEMA), which runs the NFIP, estimates it will need nearly $24 billion to pay off claims resulting from the devastation of Hurricanes Katrina and Rita last year. In a letter of support prior to the House vote, NAHB said that H.R. 4973 “strikes the proper balance in protecting the NFIP’s long-term financial stability while ensuring that federally-backed flood insurance remains available and affordable.” Addressing NAHB concerns, the measure retains the current 100-year floodplain and rejects mandatory purchase requirements for properties within the natural 100-year floodplain. Instead, the legislation would commission the U.S. Comptroller General to review mandatory purchase requirements for the natural 100-year floodplain and home owners with non-federal loans. Coverage is currently mandatory for all federally backed loans. H.R. 4973 would also: - Increase the amount FEMA can raise rates in any given year from 10% to 15%.
- Raise 1994 coverage limits for residential flood insurance policies from $250,000 (structure) and $100,000 (contents) to $335,000 and $135,000. Non-residential properties would see an increase from $500,000 to $670,000.
- Direct FEMA to report to Congress twice a year on the financial status of the NFIP.
- Require FEMA to conduct a comprehensive review of the nation’s flood maps — including mapping of the 500-year floodplain — and to report its findings to Congress.
- Phase out NFIP subsidies for vacation homes, second homes and commercial properties. However, efforts to immediately eliminate all subsidies for these properties were soundly defeated on the House floor.
- Require FEMA to maintain and publish an inventory of U.S. levees.
- Increase enforcement tools for bank regulators at the state and federal levels.
Seeking to capitalize on the momentum of the House-passed bill, Senate Banking Committee Chairman Richard Shelby (R-Ala.) attempted to move his committee-passed flood insurance bill (S. 3589) to the Senate floor by unanimous consent.
Upon receiving notice of this action, NAHB sent a letter to the full chamber expressing concern over a mandatory purchase requirement for properties sited behind flood protection structures within the natural 100-year floodplain. NAHB noted that this would penalize communities that have opted to install flood control structures by requiring residents who have already paid taxes for these facilities to purchase flood insurance. Rather than taking such a broad approach, NAHB urged the Senate to first investigate how this action would affect property owners and local communities, and then to demonstrate that the increased premiums are necessary. Ultimately, Shelby was not able to pass his bill under unanimous consent, allowing NAHB to continue advocacy efforts opposing the mandatory purchase provision. As the Senate bill advances in the coming months, NAHB will continue to support reforms to ensure that federally-backed flood insurance remains available and affordable and that the NFIP is financially stable. At the same time, the association will continue to oppose the mandatory purchase provision. Established in 1968, the NFIP offers affordable flood insurance to home owners and businesses in flood plains and other low-lying areas that otherwise might not be able to obtain coverage. More than 20,000 communities nationwide participate in the NFIP and the program currently covers approximately 4.8 million policyholders. To read the legislation, click here and enter H.R. 4973 or S. 3589 in the box at the center of the page. | 
