(Reuters) - House and Senate members have reached a bipartisan agreement to delay by at least four years a flood insurance rate hike that would impact more than a million homeowners, according to congressional sources.
The agreement would require the Federal Emergency Management Agency (FEMA) to complete an affordability study before increasing future flood insurance premiums, according to a copy of the draft legislation obtained by Reuters.
Legislation delaying the policy increases is due to be filed in the Senate on Tuesday, according to congressional sources.
"Because lawmakers on both sides of the political aisle and both legislative chambers have agreed, it's anticipated their legislation could pass quickly," said Ryan Brown, a spokesman for Democratic Senator Bill Nelson of Florida, one of the most impacted states.
Nelson said the deal was crafted with Representative Maxine Waters, a California Democrat and one of the original co-sponsors of the 2012 Biggert-Waters Flood Insurance Reform Act that forced up premiums.
Among Republican Senators reportedly supporting the deal are Johnny Isakson of Georgia, Thad Cochran of Mississippi, and David Vitter of Louisiana, according to Insurance Journal. Reuters was not immediately able to confirm their support.
Congress passed the Biggert-Waters Act in July 2012 with strong bipartisan support just months before Superstorm Sandy struck the northeastern coast in late October, in an effort to balance a $24 billion deficit in the National Flood Insurance Program, which had growing losses from Hurricane Katrina in New Orleans in 2005 and earlier disasters.
The rate hike is designed to make property owners pay for the true risk of living in high flood hazard areas, including coastal areas of Florida, New Jersey, New York, Texas and Louisiana, and inland states prone to river flooding.
The hike potentially impacted a million homeowners living in older houses along the coastlines and riverbanks of the United States, with the annual flood insurance premium on some homes set to jump tenfold over the next few years.
The Biggert-Waters Act requires FEMA to phase out insurance subsidies enjoyed for decades by owners of homes that were built in high-risk flood zones before the creation of the original federal flood insurance rate maps and building standards, which in most communities occurred in the 1970s and 1980s.
Critics of subsidized federal flood insurance say the benefits disproportionately favor high-risk and wealthy properties.
"Delaying the scheduled phase-out of flood insurance premium subsidies amounts to a gift to mostly wealthy homeowners who get to enjoy cheap insurance on their beach homes thanks to taxpayer support," R.J. Lehmann, a senior fellow with R Street, a free market think tank, said in a statement.
FEMA Director Craig Fugate told a September hearing of the U.S. Senate Banking, Housing and Urban Affairs Committee that the act unfairly hit middle-class homeowners who had not been flooded repeatedly.
Reporting by David Adams in Miami; Editing by Lisa Shumaker