The Biggert-Waters Flood Insurance Reform Act of 2012 (Biggert-Waters Act) was signed into law to reform and reauthorize the National Flood Insurance Program (NFIP) for five years. Administered by the Federal Emergency Management Agency (FEMA), NFIP is a crucial program that provides over 5.6 million policyholders with affordable flood insurance for homes and commercial real estate in flood-prone areas. In many cases, NFIP is the only flood insurance available to protect builders and homeowners’ investments. While NAHB believes in a strong and viable NFIP and supported the Biggert-Waters Act, the implementation of the law is undercutting the effectiveness of the NFIP, resulting in unnecessary economic distress to property owners.
Of particular concern to the home building industry are the unaffordable premium rates and inaccuracies in FEMA’s new flood maps. If not corrected, these issues will continue to severely impact the construction, remodeling and sale of homes while the housing industry is attempting to recover. Recent examples of the increased premium rates in North Carolina include a Single Family Residence with a current annual premium of $3,300 which, upon sale (tax value of $250,000), will increase to $59,070. Another example is the Wrightsville Beach Town Hall which will see annual premiums increase from $10,087 to $24,258. A third example is a single family residence currently paying an annual premium of $835 which went on the market and would have resulted in a new annual premium of $30,600. The sale of this property subsequently fell through. These are early examples and we expect more if the law is not amended. Ironically, the intention of the Biggert Waters Act was to make the NFIP solvent; however, it has resulted in costly and unintended consequences for homeowners across the country and will be devastating to the home building industry if homeowners and business owners are no longer able to afford the premiums and are forced out of the program completely.
Congress passed H.R. 3370, the Homeowner Flood Insurance Act, and it was signed into law by the President on March 21, 2014. This legislation provides direct relief to policyholders by creating a more affordable rate structure, repealing point-of-sale rate increases, restoring the grandfathered rates for those who built their properties according to code, and for some, providing important relief in the form of a refund. This bill also requires the remapping process to take into account local flood control structures and facilitates consumers’ ability to appeal FEMA’s mapping decisions. Further, this legislation returns the substantial improvement threshold to the historic 50 percent level, which is critical to the health of the remodeling industry.