Mr. Chairman, I appreciate the gentleman's courtesy in permitting me to speak on this, and for his leadership, along with the chairman, Mr. Oxley, and my friend, Mr. Baker. This is truly important bipartisan legislation to address the…
Mr. Chairman, I appreciate the gentleman's courtesy in permitting me to speak on this, and for his leadership, along with the chairman, Mr. Oxley, and my friend, Mr. Baker. This is truly important bipartisan legislation to address the flood insurance program's challenges both in the short term and the long term.
I strongly support this legislation and appreciate the willingness of the committee staff to work with people outside the committee to be a part of the process. Those of us here on the floor have known for a long time that the flood insurance program, while an invaluable asset to communities in the floodplain, is not functioning as originally designed. Hurricane Katrina taught us we cannot just let the status quo continue, or the flood insurance program will cease to function. It will be in bankruptcy or people will lose their tolerance for Federal bailouts.
This bill is an excellent start, but you can be guaranteed that it is not the last time we will be talking about these changes on the floor. There are differing views about what needs to be done. Some have recommended making the program actuarially sound, and I agree with those measures. But one thing we have learned from Mr. Baker and from Mr. Taylor is that we have to be sensitive to the people who live in flood-prone areas. They are not just statistics of repetitive flooding, and they are rarely homeowners who are gaming the system. These are people caught up in the cycle of flooding and rebuilding who want to take steps to reduce their vulnerability.
In 2004, we did pass a bill to provide mitigation assistance to severe repetitive-loss property owners. We found that these repetitively flooded properties, which constitute just 1 percent of all the properties in the program, accounted for 25 percent of the flood loss dollars. Addressing these properties, we wanted to help move people out of harm's way, either literally, by buying them out, or helping them take mitigation actions, such as elevation.
Unfortunately, the repetitive-loss pilot project in the 2004 bill had not been fully implemented and we were not able to see the positive impacts before Hurricane Katrina. That is why I am glad the bill before us extends the pilot program so that it will have a chance to work. It also goes further to strengthen the flood insurance program and make it more fiscally sound over the next 50 years.
Some have argued that all properties owners who enjoy artificially low flood insurance rates should be required to pay actuarial rates. This would increase the premium enough to make the program more actuarially sound, saving $1.3 billion. But while I agree the program should move closer to risk-based rates, the response of policyholders to the loss of the subsidy is unclear.
The CBO estimates that some would reduce their amount of coverage or drop flood insurance all together. Many of these subsidized properties are second homes or vacation homes, and the legislation addresses these and I think is a good compromise. Phasing in risk-based rates for second homes will also ensure that families in New Orleans and Mississippi and other flood-prone areas that rely on flood insurance won't be forced to pay artificially high rates to subsidize somebody's second home or vacation home.
The bill also helps encourage participation in the program. Many people living in the floodplains do not have flood insurance now. Less than 40 percent of the property owners who are required to buy insurance actually do so.
In parts of Mississippi and Alabama, hit hardest by Katrina, the coverage rate was only 15 percent. That means that people did not have access to insurance payouts to make them whole, and they are relying on grants and loans from the disaster relief programs that are paid by the taxpayer.
The challenge is figuring out how to make sure that more people who are supposed to have flood insurance do so, and this bill helps the situation by increasing the penalties levied for nonenforcement of Federal mandatory purchase requirements.
It also includes an important study on how to better enforce mandatory flood insurance.
The bill also addresses the inaccuracy and inadequacy of flood insurance maps. We are going to talk a little about this later in the day.
Current flood insurance is required only where there is a 1 percent chance of a flood on an annual basis and not in other low-lying areas where surges are likely to follow major storms. Many of the people who flooded in Katrina did not technically live in the floodplain. They were out of this 100-year cycle, or they lived behind levees and did not realize they should have flood insurance.
These updated maps are important, because FEMA uses them to issue flood elevation requirements. Communities want to have the confidence that their residents are paying the right amount for flood insurance, and we should be loathe to tinker with that.
In addition to directing FEMA to develop more sophisticated maps, this legislation authorizes FEMA to study the implications of requiring flood insurance behind the levees. This is a very important part of the bill. I don't think it has been given the proper attention by more of us in Congress. I hope that we will move towards requiring flood insurance for those situations.
The saying goes, there are only two kinds of levees, those that fail and those that will fail. But this study moves us in the right direction.
While this bill, I think, sets the stage, for moving us in the right direction, simple, common-sense steps strengthen the program and bring together a vast, diverse range of people, from environmentalists to fiscal conservatives, people in real estate, and most important, most important, people whose lives we saw torn apart living in flood-prone areas.
I deeply appreciate the work of this committee and our colleagues in making important steps that are going to make a difference for people for generations to come.
Mr. Chairman, I seek time in opposition to the amendment.
Let me say, I appreciate the intent that is offered by the sponsors of this amendment. I was prepared, however, to argue rather strongly in opposition in terms of the reimbursement mechanism that was involved, but I understand that that has been stripped out and it is now just purely a notification. While I am hopeful that, as this works its way through the process, we can deal with making sure that the notification process doesn't get in the way of trying to move this in an orderly fashion, I am not prepared to demand a rollcall or be cranky about it, because I do think you have adjusted your amendment so that it loses its onerous nature in the way that it was originally filed.
I appreciate the direction you are going and would look forward to working with the gentlemen to make sure that this furthers the public notification but does not bog down the process unnecessarily. As I say, I appreciate the direction that you are going.
I yield to the gentleman from California.
I personally feel more comfortable about that. I didn't know it when I claimed time in opposition because I had some outdated information. I didn't realize how fast this legislative train was rolling, but I feel better now.
Mr. Chairman, I yield back the balance of my time.
Mr. Chairman, I would claim the time in opposition.
Mr. Chairman, I would yield myself 3 minutes.
Let me say, I appreciate the gentleman's deep interest in making sure that we are moving forward with reform in the flood insurance program and that we are dealing with some of the idiosyncratic ways that there are some folks that never get out of being an exception. With all due respect, that the approach that has been adopted by the committee is one that over the long run is going to be the most advantageous.
I share your concern, but as I have been working with the floodplain managers from the various States around the country, the people on the ground are concerned about the impact that the rapid movement towards dealing with these other subsidized residential properties would have. There is a very real problem because a lot of these properties do change hands frequently, in knowing what the impact is, and that many people would end up not seeking subsidized property, that communities may opt out, all this could end up being counterproductive. Particularly as it relates to the area, and again I referenced in my opening comments being sensitized by Mr. Taylor and by Mr. Baker, about some of the practical realities, particularly for low-income communities. While it seems that this would be a way to phase it in only when the property changes hands, this would have the practical effect of discounting the value overnight to the people who own these properties, many of whom may be low income. So it would depress the price of the homes that they own because the seller would be subjected to the higher premium.
You and I know that in the long run that is a more rational policy for the taxpayer and for the people who hold those policies, but there is a psychology that is at work with some communities and with some owners and it may well be counterproductive.
So, with all due respect, I would suggest that what we ought to be doing is looking for ways to phase it in over time with these communities, that we deal with emphasizing mitigation like we had in the 2004 legislation, because I fear there may be a double whammy, where communities are less interested in participating and that you may be penalizing some of the very low-income property owners in a way that I don't think any of us want.
So while I sympathize with the approach, while I applaud the committee for advancing the boundaries, this is one area where I would suggest that this, what looks like a simple phase-in, actually may not be a simple phase-in and may have unintended consequences.
Mr. Chairman, I reserve the balance of my time.
Mr. Chairman, I yield 1 minute to the gentleman from Massachusetts (Mr. Frank).
Mr. Chairman, I yield myself such time as I may consume.
Mr. Chairman, I appreciate what the gentleman is saying. I have spent the last 6 years trying to inject some fiscal responsibility into the program. I have supported the work that the committee has done. But along the way, I have been sensitized to some of the impacts that we don't want to have that are unintended in terms of discouraging participation.
So as you are working with the committee in terms of refining this, I would hope that there would be some sensitivity, if this amendment passes, to the impact on low income.
For instance, one of the unintended consequences may be driving people who are in this circumstance to be seeking financing from sub prime lenders there by avoiding flood insurance, by very expensive financing mechanisms. It ought to go hand in hand with what we do in terms of having more mandatory coverage so there aren't people that are sort of drifting along, and that it doesn't have unintended consequences for having people and communities opt out, or for low- income people, being unduly disadvantaged. I sympathize with what you are saying, and I would be happy to work with you as well.