The crux of the issue is whether the National Flood Insurance Program can continue to support older, flood-prone homes without charging the exorbitant premiums that appear justified by their risk of catastrophe.
Congressional leaders from Oregon to Florida are getting pushback from homeowners shocked to find their mandatory flood policies leaping to unaffordable levels without warning.
At the same time, some fiscal conservatives and other watchdog groups insist it's only fair to remove long-standing subsidies that have kept rates low for a relatively small group of policyholders.
Twenty percent of flood policyholders own aging, low-lying properties that mostly aren't built up to contemporary standards and which could cost the program, and the nation, billions more in the future.
Flood insurance reform is particularly complex in Florida, a state that relies on its beach tourism and coastal population centers but also has a political bent toward the fiscal conservatism championed by leaders such as Republican Gov. Rick Scott and U.S. Sen. Marco Rubio.
Even Scott, a severe critic of federal debt, is urging Congress to slow the program's rate hikes, which are meant to fill a more than $20-billion deficit but could make thousands of coastal homes unsellable.
“This unfair consequence could devastate parts of Florida's real estate market, stymie Florida's economic recovery and diminish the state's tax base,” Scott wrote in a letter last week to senators Marco Rubio and Bill Nelson.
Nelson, a Democrat, has already said he supports a one-year moratorium on rate increases, many of which will take full effect on Oct. 1.
The U.S. House of Representatives has passed an amendment contained in a homeland security appropriations bill that would delay the rate changes, but it's not clear yet when the Senate will vote on it.
Rubio, a possible GOP candidate for the 2016 presidential election, has been less clear on his stance.
“Sen. Rubio believes rate reform is important to ensure the National Flood Insurance Program survives, but he is concerned about the impact of rate increases on Florida families, which is why he is continuing to work with his colleagues on solutions to ensure the program's long-term sustainability without excessively burdening Florida families,” spokeswoman Brooke Sammon wrote in an email.
Tampa Bay Beaches Chamber of Commerce head Robin Sollie flew to Washington, D.C., last week to lobby congressional leaders about the issue, and St. Petersburg Mayor Bill Foster has joined numerous other city leaders to push for a delay of the law.
Neither Rubio nor Nelson attended a subcommittee hearing last week in Washington, where senators from Louisiana, New York, New Jersey and even inland states such as North Dakota and Montana questioned FEMA Director Craig Fugate and other experts about the unintended consequences of the reform.
Louisiana senators Mary Landrieu and David Vitter, a Democrat and a Republican, both grilled Fugate on his agency's implementation of the Biggert-Waters Flood Insurance Reform Act, relaying stories of low-income constituents whose modest homes could see their flood policy exceed $20,000 a year.
Part of the bill mandated that FEMA complete an affordability study within 270 days, but Fugate said the study has proven more expensive and time-consuming than expected and may not be finished until 2015.
In the meantime, many people who bought homes that had been subsidized by the program since the bill passed in July 2012 are beginning to receive new unsubsidized rates that are catching many off-guard.
Stephen Ellis, vice president of the nonpartisan Taxpayers for Common Sense, urged the senate panel not to delay the reforms.
“People deserve to know the costs and risks of where they live, and taxpayers deserve for those who choose to live in harm's way pick up their share of the tab,” Ellis said.
Maintaining artificially low rates has also fueled a coastal development boom in recent decades that has increased the program's risk exposure and losses, he said.
Even in Florida, where thousands of homeowners stand to lose their property value, some conservative analysts and activists insist removing the subsidies is only fair.
Robert Sanchez, policy director for the Tallahassee-based James Madison Institute, said car and life insurance rates reflect the perceived risk of individual policyholders and so should flood insurance.
“However, the free marketplace for flood insurance pretty much ceased to exist many years ago, and because of government subsidies the rates do not reflect the true risk of losses from flooding,” he said.
“Instead, taxpayers who live far from flood zones are, in effect, subsidizing the lowering of flood-insurance rates for those who do live in a flood zone.”
Sanchez added that subsidies should be phased out rather than abruptly removed, though he supports ending them when a property is sold.
Donald Rich, a Riverview resident and former tea party member, said it's a homeowner's choice to live in a flood zone and the costs of that decision shouldn't be passed on to others.
“If you don't have a mortgage, the alternative is don't have flood insurance,” he said. “But don't call me if it floats away.”
Increasing rates is necessary, but legislators should find a way to soften the blow for homebuyers, according to Everett Wilkinson, a leader of the Florida Tea Party.
“The homeowners are stuck between a rock and a rough place,” said Wilkinson, who lives in Palm Beach Gardens.
Wilkinson and many fiscal conservatives favor turning the program back over to the private sector.
At last month's flood insurance forum in Treasure Island, Chamber of Commerce board member Larry Lunn also suggested taking the program out of federal hands.
“Florida has not had as many assessments for floods against the funds of FEMA as many other parts of the U.S., and yet we're getting hit harder,” Lunn said.
The governor in his letter highlighted the fact that Florida property owners have paid more than $16 billion into the federal flood program in the past 35 years — four times more than what they received back from claims.
A part of the federal reform bill mandates both the U.S. Government Accountability Office and FEMA conduct studies on the impact of returning flood insurance to the private sector.
Panelists at last week's Senate hearing floated the idea as a longer-term solution.
“If you want to make sure rates are accurate, then what you want to do is privatize the flood insurance program. You want to utilize the ability of the insurance industry to do the risk modeling and do the pricing they do for other types of perils,” said Birny Birnbaum, director of the consumer advocacy group The Center for Economic Justice.
Birnbaum added that private insurers in Europe are given incentives to work with homeowners to make their properties more flood-resistant.
At the close of the hearing, the committee's chairman, Sen. Jeff Merkley pointed out that the original reason the federal flood insurance program began in 1968 is because private coverage was too expensive and homeowners weren't buying it.
“I am struck by the fact that we started the hearing hearing about how essentially a private system broke down because policies were too high and people weren't buying them,” said Merkley, an Oregon Democrat.
“And now we essentially are trying to create risk-based policies that kind of reflect what the market should do, and the prices are so that it's breaking down.”