The Homeowner Flood Insurance Affordability Act (HFIAA) passed the House of Representatives last night with a vote of 306 – 91.  This is phenomenal news for both potential and current owners of property located in a coastal flood zone.  The Senate is expected to vote on the bill by weeks end.

The main provisions of this bill include:

  Reinstating “grandfathering.  In essence, properties built to code in the past won’t be penalized with catastrophic rate increases due to remapping

  Implementing caps on rate increases.  Most individual property rates cannot increase more than 18% per year.  There are also new protections for newly mapped properties

  The repeal of certain rate increase triggers.  Among other things, ensures that no new policyholder will experience dramatic rate increases from the sale of a home

To address the issue of liquidity of the program, the HIFAA will implement a $250 surcharge for second homeowners and a $25 surcharge to primary residents.  And while detractors of the bill suggest this will not go far enough, the non-partisan Congressional Budget Office says that the house bill would have zero impact on the financial solvency of the NFIP and will pay for itself over the next decade.

As background, the National Flood Insurance Program was founded in 1968 for the purpose of enabling property owners in participating communities to purchase affordable flood insurance.  However, massive claims payouts, largely due to Hurricane Katrina in 2005, put the program more than $24 Billion in debt, and thus in 2012, The Flood Insurance Reform Act, also known as Biggert-Waters was passed to try and stabilize the program.   This bill subsequently had severe unintended consequences, creating skyrocketing premiums for even modest homes with little risk of flooding.