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Bill C.
Republican LA

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  • Homeowner Flood Insurance Affordability Act

    by Senator Bill Cassidy

    Posted on 2014-01-08

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    CASSIDY. Mr. Speaker, I rise in support of the reform the Biggert-Waters Act. Let's first point out that the flood insurance program was reformed under Biggert-Waters with the goal to make it both affordable and accessible. It did indeed make flood insurance accessible, but it is being implemented in such a way as to make it unaffordable.

    Now, the question is: Is this, as some people called it, a bailout for vacation homes for the rich people? Is it going to improve the solvency of the program? Yet, somehow do we have to see how these reforms play out before we reform once more? Let's address each of these. This will do absolutely nothing for the solvency of the National Flood Insurance Program. Indeed, it is guaranteed to make it insolvent.

    FEMA estimates that for every 10 percent increase in a premium, you have a 1 percent decrease in the number of people purchasing that policy. Do the math. Somebody whose policy is now $700, if it rises to $7,000, they have a basically 100 percent chance of dropping their policy.

    When that happens, FEMA still has to cover their fixed costs. Those fixed costs are concentrated under fewer and fewer subscribers to the insurance policy, which means that even more people get to the point where they can no longer afford this policy, which means, that, again, that fixed cost is concentrated further. You have entered the death spiral of a program, so the National Flood Insurance Program dies. That will happen, under the assumptions used by CBO for these estimates.

    Now, some would say, wait a second. FEMA actually had some good reforms to work with. That is true, but they are not really implementing them.

    FEMA is doing their few flood maps with what is called a no levee analysis. If the Army Corps of Engineers has not certified a flood control structure, FEMA pretends it is not there.

    Now, Lafourche Parish in south Louisiana has a levee they built themselves, and they have pictures; on the one side they have floodwaters, and on the other side they have dry land with flowers. Those levees clearly work, but because they are not Army Corps of Engineers certified, Lafourche Parish gets no credit.

    Jefferson Parish, a suburb of New Orleans, has big pumps to help reduce floodwaters, and yet FEMA does not include the efficacy of these in their flood maps.

    This no levee analysis was not supposed to be part of Biggert-Waters, but that is how the program is being implemented.

    {time} 1800 Now, is this a bailout for rich people? The people in Louisiana who will benefit from reforming our current process, which is to say suffer under Biggert-Waters, as currently crafted, are working people. They work in the refineries that provide the gasoline for the rest of the Nation. Their homes are $120,000 to $220,000. These are not rich people insuring vacation homes. These are folks in their primary residences-- in many cases, homes that have never flooded but, in many cases, homes that would suffer under this program.

    And that leads me to the harm to the economy that will occur. The uncertainty of the cost of flood insurance is freezing real estate markets. Homebuilders have no market for the homes that they wish to build. There is a cratering of the bank lending. Indeed, there are reports of people taking their keys into the bank, dropping those keys on a desk, unable to afford the flood insurance, therefore unable to keep their mortgage so walking away from the home that they are attempting to purchase.

    The impact upon the rest of the country? Most of the refined gasoline in the rest of the country is refined on the gulf coast, Louisiana, and in Texas. Those workers cannot afford to keep the homes that allow them to work in these refineries. There is an economic impact both locally in the State but it, indeed, goes nationwide. Flood insurance should be accessible. It should be affordable. Biggert-Waters needs to be further reformed in order to allow both.

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