In response to concerns raised by the public, legislators, the Community Associations Institute and others, Congress recently passed the Homeowner Flood Insurance Affordability Act of 2014.  Signed by President Obama into law, the legislation forestalls significant increases in flood insurance premiums that were set to have taken effect.

The Act implements measures, including the following: an 18% annual cap on flood insurance premium rate increases under the National Flood Insurance Program; reinstatement of subsidies on existing properties at the time of sale, thus preventing properties complying with prior flood maps from being hit with significant increases under new maps showing a greater potential for flooding risk; reinstatement of certain grandfathering provisions for properties now located in high risk areas under new FEMA maps; premium refunds to certain homeowners who overpaid premiums; measures to minimize annual premium increases; and completion of a study on implementing additional affordability measures.

Under the Act, there will be efforts to better coordinate flood map updates with local community concerns and to assist local communities in necessary flood mitigation measures in light of the new flood map zones.

This legislation, at least temporarily, provides a reprieve and mitigates against harsh, unaffordable increases, which would have driven even more individual homeowners from their properties, and would have imposed draconian cost increases upon common interest properties in New Jersey and elsewhere. 

It remains to be seen whether the gains felt through the enacted measure will be eroded over time, or whether overall program compromises in this area will allow earlier proposed increases to creep back into the NFIP, as administered by the government.  The NFIP was originally put in place due to the lack of affordability of market rate insurance in flood prone areas.  An additional concern is whether the program itself is sustainable, in the long run, given the significant costs associated with Sandy and with prior storms generally occurring in other parts of the country.