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115th Congress    }                                          {    Report
                          HOUSE OF REPRESENTATIVES
 1st Session      }                                          {   115-211

======================================================================



 
  NATIONAL FLOOD INSURANCE PROGRAM POLICYHOLDER PROTECTION ACT OF 2017

                                _______
                                

 July 11, 2017.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

Mr. Hensarling, from the Committee on Financial Services, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 2868]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 2868) to protect National Flood Insurance 
Program policyholders from unreasonable premium rates and to 
require the Program to consider the unique characteristics of 
urban properties, and for other purposes, having considered the 
same, report favorably thereon without amendment and recommend 
that the bill do pass.

                          Purpose and Summary

    Introduced by Representative Lee Zeldin on June 8, 2017, 
H.R. 2868, the ``National Flood Insurance Program Policyholder 
Protection Act of 2017,'' amends the National Flood Insurance 
Act of 1968 to require a maximum 1-4 residential premium of 
$10,000 and provide for mitigation credit for certain 
mitigation activities unique in urban areas.

                  Background and Need for Legislation


                            GENERAL OVERVIEW

    Floods are among the most frequently occurring and costly 
natural disasters. Most declarations of federal disasters by 
the Federal Emergency Management Agency (FEMA) are related to 
flooding. Yet despite the frequency and severity of losses that 
result from flooding, the private insurance market generally 
did not provide insurance for flooding; when it did, insurance 
for flood-related damage can be expensive because the 
properties most at-risk tend to be highly concentrated 
geographically and the potential risk of economic losses is 
extremely high.
    To supplement the availability of flood insurance in the 
private market, Congress, in 1968, created the National Flood 
Insurance Program (NFIP), which is administered by FEMA and 
provides flood insurance to approximately 5.1 million 
policyholders across the country. In exchange for premiums paid 
by policyholders, NFIP makes federally backed flood insurance 
available to homeowners and other property owners (for example, 
businesses, churches, and farmers) in these communities.
    Homeowners with mortgages held by federally regulated 
lenders on property in participating communities identified by 
FEMA to be in Special Flood Hazard Areas are required to 
purchase flood insurance (mandatory purchase requirement). NFIP 
coverage limits vary by program (regular or emergency) and 
property type (for example, residential or nonresidential). In 
NFIP's regular program, the maximum coverage limits for 
residential policyholders are $250,000 for buildings and 
$100,000 for contents. For commercial policyholders (that is, 
those with policies for nonresidential properties), the maximum 
coverage limit is $500,000 per building and $500,000 for 
contents owned by the building owner. There is additional 
coverage for contents owned by the tenants.
    Residents and business owners in over 22,000 participating 
communities across the United States and its territories are 
able to buy NFIP flood insurance policies through insurance 
agents and companies that participate as third-party 
administrators in the ``Write Your Own'' (WYO) program. The WYO 
program allows private insurance carriers to issue and service 
government underwritten and taxpayer backed NFIP policies with 
no private financial liability from the insurer. Insurance 
companies that participate in the WYO program receive an 
expense allowance for policies they write and the claims they 
process. In addition, their agents earn a commission for the 
policies they sell. The federal government, however, retains 
responsibility for managing the risk and paying claims, as well 
as covering any litigation costs should a WYO insurer be sued 
in court.
    Property owners can purchase flood insurance through the 
NFIP only if their communities participate in the NFIP. To 
participate in the NFIP, a community must agree to abide by 
certain statutory provisions intended to mitigate the risk of 
flooding, such as building codes that require new structures 
built in floodplains (high-risk areas) to be protected against 
flooding or to be elevated above the 100-year floodplain.
    As of June 5, 2017, the NFIP has an outstanding debt of 
$24.6 billion borrowed from taxpayers, with roughly $1.1 
billion available cash-on-hand and $5.825 billion remaining of 
its total temporary $30.425 billion Treasury borrowing 
authority. The NFIP's debt results primarily from its borrowing 
to pay claims relating to the Gulf Coast hurricanes in 2005 and 
Superstorm Sandy in October 2012. This borrowing stems from a 
structural imbalance in how the NFIP measures and prices for 
risk, resulting in only 46 percent of premium dollars collected 
in 2016 being available for the payments of claims. With such a 
low portion of premiums available to pay claims, the pressure 
on the NFIP to borrow from taxpayers increases. The NFIP's 
structural budget crisis has required periodic legislation to 
increase its borrowing authority, the most recent example of 
which occurred in January 2013 when Congress increased the 
NFIP's borrowing authority by $9.7 billion--from $20.725 
billion to its current $30.425 billion level.
    H.R. 2868 would address affordability concerns raised by 
constituents by limiting the NFIP risk premium of any single-
family residential property to $10,000 a year. In addition, 
this bill would authorize FEMA to provide NFIP policyholders 
who are not eligible for preferred risk premium rates with 
credits for a policyholder that can be used to reduce their 
premium rates if they mitigate certain flood risks on their 
property. These mitigation efforts could include using 
innovative mitigation techniques for buildings in dense urban 
environments and the elevation of mechanical systems.
    In dense urban areas, raising a structure to mitigate it 
from flooding may not be an option. However, in many of these 
buildings, the heating, ventilation and air conditioning (HVAC) 
units are on the ground floor and at risk of damage from flood 
waters. H.R. 2868 would authorize FEMA to authorize premium 
discounts if HVAC and other mechanical systems are moved to 
higher level. Finally, H.R. 2868 requires a FEMA study on the 
feasibility of offering NFIP coverage of individual dwelling 
units in cooperative housing developments to address unique 
housing issues in certain geographical areas where cooperative 
housing is a significant share of the housing market.

                                Hearings

    The Committee on Financial Services' Subcommittee on 
Housing & Insurance held two hearings examining matters 
relating to H.R. 2868 on March 9, 2017 and March 16, 2017. The 
Committee on Financial Services held a hearing examining 
matters relating to H.R. 2868 on June 7, 2017.

                        Committee Consideration

    The Committee on Financial Services met in open session on 
June 15, 2017 to consider H.R. 2868. The Committee ordered H.R. 
2868 to be reported favorably to the House, without amendment, 
by a recorded vote of 53 yeas to 0 nays (Recorded vote no. FC-
58), a quorum being present.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. The 
sole recorded vote was on a motion by Chairman Hensarling to 
report the bill favorably to the House without amendment. The 
motion was agreed to by a recorded vote of 53 yeas to 0 nays 
(Recorded vote no. FC-58]), a quorum being present.


                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the findings and recommendations of 
the Committee based on oversight activities under clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
are incorporated in the descriptive portions of this report.

                    Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee states that H.R. 2868 
will protect NFIP policyholders by providing for a maximum 
premium on 1-4 residential properties at $10,000 and provide 
for mitigation credit for certain mitigation activities unique 
in urban areas.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimate of new budget authority, entitlement 
authority, or tax expenditures or revenues contained in the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to section 402 of the Congressional 
Budget Act of 1974.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                 Congressional Budget Office Estimates

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                      Washington, DC, July 7, 2017.
Hon. Jeb Hensarling,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 2868, the National 
Flood Insurance Program Policyholder Protection Act of 2017.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Robert Reese.
            Sincerely,
                                                        Keith Hall.
    Enclosure.

H.R. 2868--National Flood Insurance Program Policyholder Protection Act 
        of 2017

    Summary: H.R. 2868 would require the Federal Emergency 
Management Agency (FEMA) to cap annual premiums charged for 
certain National Flood Insurance Program (NFIP) policies at 
$10,000 for five years. The cap would be adjusted for inflation 
every five years. The bill also would require FEMA to update 
guidelines on methods to mitigate flood prone properties and to 
conduct a study on the feasibility of providing NFIP coverage 
to individual dwelling units in cooperative housing projects.
    CBO estimates that enacting H.R. 2868 would increase direct 
spending by $68 million over the 2018-2027 period. Because 
enacting H.R. 2868 would affect direct spending, pay-as-you-go 
procedures apply. Enacting the legislation would not affect 
revenues. CBO estimates that implementing the bill would have 
no significant effect on spending subject to appropriation in 
any year.
    CBO estimates that enacting H.R. 2868 would not increase 
net direct spending or on-budget deficits by more than $5 
billion in any of the four consecutive 10-year periods 
beginning in 2028.
    H.R. 2868 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would impose no costs on state, local, or tribal 
governments.
    Estimated cost to the Federal Government: The estimated 
budgetary effect of H.R. 2868 is shown in the following table. 
The costs of this legislation fall within budget function 450 
(community and regional development).

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              By fiscal year, in millions of dollars--
                                           -------------------------------------------------------------------------------------------------------------
                                             2017    2018    2019    2020    2021    2022    2023    2024    2025    2026    2027   2017-2022  2017-2027
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              INCREASES IN DIRECT SPENDING
 
Estimated Budget Authority................       0       2       3       4       5       7       6       7       9      11      14        21         68
Estimated Outlays.........................       0       2       3       4       5       7       6       7       9      11      14        21         68
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Basis of estimate: For this estimate, CBO assumes that H.R. 
2868 will be enacted near the end of fiscal year 2017 and that 
the required changes in NFIP premiums would go into effect in 
the middle of fiscal year 2018.

Background

    Under current law, property owners can buy flood insurance 
through the NFIP. Owners of properties that are located within 
an area designated as having at least a 1 percent chance of 
being flooded in any year (known as a Special Flood Hazard 
Area, or SFHA) and that are financed by a federally regulated 
lending institution, government-sponsored enterprise for 
housing, or federal lender are required to carry flood 
insurance. Property owners not receiving financing from those 
entities or that are located outside a SFHA may purchase flood 
insurance from a private carrier or the NFIP at their 
discretion.
    Property owners who buy insurance through the NFIP pay 
annual premiums which are deposited into the National Flood 
Insurance Fund and are used to pay flood damage claims 
submitted by policyholders. Those premiums and payments are not 
subject to annual appropriation.

Cap on Premiums

    H.R. 2868 would require FEMA to cap NFIP premiums for all 
residential properties with four or fewer residences at $10,000 
for the first five years following enactment. Every five years, 
the cap would be adjusted for inflation. According to data from 
FEMA, about 800 NFIP policies for single and multi-family homes 
(about 0.02 percent of all single and multi-family policies in 
force) had premiums above $10,000 in 2017.
    Based on information from FEMA on current NFIP premiums and 
accounting for anticipated inflation and anticipated growth in 
the number and cost of NFIP policies, CBO estimates that 
capping premiums for single and multi-family home policies at 
$10,000 would lead to a reduction in NFIP receipts, which are 
recorded as reductions in directspending. In total CBO expects 
that the policy would increase direct spending by $68 million over the 
2018-2027 period. After 5 years, in mid-2022, CBO estimates the cap in 
policy premiums would be adjusted to $11,200. That would cause the loss 
of premium collections in 2023 to be slightly smaller than in 2022 
because the higher cap on premiums would affect fewer policies in that 
year. In 2016 the NFIP collected $3.5 billion in policy premiums.

Other Requirements

    H.R. 2868 also would direct FEMA to reduce the premiums of 
NFIP policyholders who undergo flood mitigation activities. 
Under current law, FEMA reduces premiums for structures that 
are improved to better guard against flooding; therefore, CBO 
estimates that implementing this requirement would have no 
effect on the federal budget.
    Pay-As-You-Go considerations: The Statutory Pay-As-You-Go 
Act of 2010 establishes budget-reporting and enforcement 
procedures for legislation affecting direct spending or 
revenues. The net changes in outlays that are subject to those 
pay-as-you-go procedures are shown in the following table.

         CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 2868, AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON FINANCIAL SERVICES ON JUNE 15, 2017
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              By fiscal year, in millions of dollars--
                                           -------------------------------------------------------------------------------------------------------------
                                             2017    2018    2019    2020    2021    2022    2023    2024    2025    2026    2027   2017-2022  2017-2027
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               NET INCREASE IN THE DEFICIT
 
Statutory Pay-As-You-Go Impact............       0       2       3       4       5       7       6       7       9      11      14        21         68
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Increase in long-term direct spending and deficits: CBO 
estimates that enacting H.R. 2868 would not increase net direct 
spending or on-budget deficits by more than $5 billion in any 
of the four consecutive 10-year periods beginning in 2028.
    Intergovernmental and private-sector impact: H.R. 2868 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would impose no costs on state, local, or 
tribal governments.
    Estimate prepared by: Federal costs: Robert Reese; Impact 
on state, local, and tribal governments: Rachel Austin; Impact 
on the private sector: Logan Smith.
    Estimate approved by: H. Samuel Papenfuss, Deputy Assistant 
Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of the section 
102(b)(3) of the Congressional Accountability Act.

                         Earmark Identification

    H.R. 2868 does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

                    Duplication of Federal Programs

    Pursuant to section 3(c)(5) of rule XIII of the Rules of 
the House of Representatives , the Committee states that no 
provision of H.R. 2868 establishes or reauthorizes a program of 
the Federal Government known to be duplicative of another 
Federal program, a program that was included in any report from 
the Government Accountability Office to Congress pursuant to 
section 21 of Public Law 111-139, or a program related to a 
program identified in the most recent Catalog of Federal 
Domestic Assistance.

                   Disclosure of Directed Rulemaking

    Pursuant to section 3(i) of H. Res. 5, 115th Cong. (2017), 
the Committee states that H.R. 2868 contains no directed 
rulemaking.

             Section-by-Section Analysis of the Legislation


Sec. 1. Short title

    This Act may be cited as the ``National Flood Insurance 
Program Policyholder Protection Act of 2017''

Sec. 2. Cap on premiums

    H.R. 2868 limits the chargeable risk premium of any single 
family residential property to $10,000 per year, adjusted for 
inflation every five years

Sec. 3. Premium rates for certain mitigated properties

    H.R. 2868 authorizes the FEMA Administrator to provide 
policyholders who are not eligible for preferred risk rate 
method premiums with credits they can use to reduce their risk 
premium rates through approved actions to mitigate the flood 
risk of their property, including innovative mitigation 
techniques for buildings in dense urban environments and the 
elevation of mechanical systems.

Sec. 4. Study of flood insurance coverage for units in cooperative 
        housing

    H.R. 2868 requires the FEMA Administrator to conduct a 
study on the feasibility of offering NFIP coverage of 
individual dwelling units in cooperative housing developments.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, and existing law in which no 
change is proposed is shown in roman):

NATIONAL FLOOD INSURANCE ACT OF 1968

           *       *       *       *       *       *       *


TITLE XIII--NATIONAL FLOOD INSURANCE

           *       *       *       *       *       *       *


CHAPTER I--THE NATIONAL FLOOD INSURANCE PROGRAM

           *       *       *       *       *       *       *


               establishment of chargeable premium rates

  Sec. 1308. (a) On the basis of estimates made under section 
1307 and such other information as may be necessary, the 
Administrator shall from time to time prescribe, after 
providing notice--
          (1) chargeable premium rates for any types and 
        classes of properties for which insurance coverage 
        shall be available under section 1305 (at less than the 
        estimated risk premium rates under section 1307(a)(1), 
        where necessary), and
          (2) the terms and conditions under which, and the 
        areas (including subdivisions thereof) within which 
        such rates shall apply.
  (b) Such rates shall, insofar as practicable, be--
          (1) based on a consideration of the respective risks 
        involved, including differences in risks due to land 
        use measures, flood-proofing, flood forecasting, and 
        similar measures;
          (2) adequate, on the basis of accepted actuarial 
        principles, to provide reserves for anticipated losses, 
        or if less than such amount consistent with the 
        objective of making flood insurance available where 
        necessary at reasonable rates so as to encourage 
        prospective insureds to purchase such insurance and 
        with the purposes of this title;
          (3) adequate, together with the fee under paragraph 
        (1)(B)(iii) or (2) of section 1307(a), to provide for 
        any administrative expenses of the flood insurance and 
        floodplain management programs (including the costs of 
        mapping activities under section 1360);
          (4) stated so as to reflect the basis for such rates, 
        including the differences (if any) between the 
        estimated risk premium rates under section 1307(a)(1) 
        and the estimated rates under section 1307(a)(2); and
          (5) adequate, on the basis of accepted actuarial 
        principles, to cover the average historical loss year 
        obligations incurred by the National Flood Insurance 
        Fund.
  (c) Actuarial Rate Properties.--Subject only to the 
limitations provided under paragraphs (1) and (2), the 
chargeable rate shall not be less than the applicable estimated 
risk premium rate for such area (or subdivision thereof) under 
section 1307(a)(1) with respect to the following properties:
          (1) Post-firm properties.--Any property the 
        construction or substantial improvement of which the 
        Administrator determines has been started after 
        December 31, 1974, or started after the effective date 
        of the initial rate map published by the Administrator 
        under paragraph (2) of section 1360 for the area in 
        which such property is located, whichever is later, 
        except that the chargeable rate for properties under 
        this paragraph shall be subject to the limitation under 
        subsection (e).
          (2) Certain leased coastal and river properties.--Any 
        property leased from the Federal Government (including 
        residential and nonresidential properties) that the 
        Administrator determines is located on the river-facing 
        side of any dike, levee, or other riverine flood 
        control structure, or seaward of any seawall or other 
        coastal flood control structure.
  (d) With respect to any chargeable premium rate prescribed 
under this section, a sum equal to the portion of the rate that 
covers any administrative expenses of carrying out the flood 
insurance and floodplain management programs which have been 
estimated under paragraphs (1)(B)(ii) and (1)(B)(iii) of 
section 1307(a) or paragraph (2) of such section (including the 
fees under such paragraphs), shall be paid to the 
Administrator. The Administrator shall deposit the sum in the 
National Flood Insurance Fund established under section 1310.
  (e) Annual Limitation on Premium Increases.--Except with 
respect to properties described under paragraph (2) of 
subsection (c), and notwithstanding any other provision of this 
title--
          (1)(A) subject to subparagraph (B), the chargeable 
        risk premium rate for flood insurance [under this title 
        for any property] under this title--
                  (i) for any property may not be increased by 
                more than 18 percent each year, [except--] 
                except as provided in paragraph (4); and
                  (ii) for any residential property having 4 or 
                fewer residences and for which a valid National 
                Flood Insurance Program Elevation Certificate 
                has been filed with the National Flood 
                Insurance Program within the proceeding 
                calendar year, may not exceed $10,000 in any 
                single year, except that such amount (as it may 
                have been previously adjusted) shall be 
                adjusted for inflation by the Administrator 
                upon the expiration of the 5-year period 
                beginning upon the enactment of the National 
                Flood Insurance Program Policyholder Protection 
                Act of 2017 and upon the expiration of each 
                successive 5-year period thereafter, in 
                accordance with an inflationary index selected 
                by the Administrator.
                  [(A) as provided in paragraph (4);
                  [(B) in the case of property identified under 
                section 1307(g); or]
                  [(C) in the case of a property that--]
          (B) The limitations under clauses (i) and (ii) of 
        subparagraph (A) shall not apply in the case of--
                  (i) a property identified under section 
                1307(g); or
                  (ii) a property that--
                                  [(i)] (I) is located in a 
                                community that has experienced 
                                a rating downgrade under the 
                                community rating system program 
                                carried out under section 
                                1315(b);
                                  [(ii)] (II) is covered by a 
                                policy with respect to which 
                                the policyholder has--
                                          [(I)] (aa) decreased 
                                        the amount of the 
                                        deductible; or
                                          [(II)] (bb) increased 
                                        the amount of coverage; 
                                        or
                                  [(iii)] (III) was misrated;
          (2) the chargeable risk premium rates for flood 
        insurance under this title for any properties initially 
        rated under section 1307(a)(2) within any single risk 
        classification, excluding properties for which the 
        chargeable risk premium rate is not less than the 
        applicable estimated risk premium rate under section 
        1307(a)(1), shall be increased by an amount that 
        results in an average of such rate increases for 
        properties within the risk classification during any 
        12-month period of not less than 5 percent of the 
        average of the risk premium rates for such properties 
        within the risk classification upon the commencement of 
        such 12-month period;
          (3) the chargeable risk premium rates for flood 
        insurance under this title for any properties within 
        any single risk classification may not be increased by 
        an amount that would result in the average of such rate 
        increases for properties within the risk classification 
        during any 12-month period exceeding 15 percent of the 
        average of the risk premium rates for properties within 
        the risk classification upon the commencement of such 
        12-month period; and
          (4) the chargeable risk premium rates for flood 
        insurance under this title for any properties described 
        in subparagraphs (A) through (E) of section 1307(a)(2) 
        shall be increased by 25 percent each year, until the 
        average risk premium rate for such properties is equal 
        to the average of the risk premium rates for properties 
        described under paragraph (3).
  (f) Adjustment of Premium.--Notwithstanding any other 
provision of law, if the Administrator determines that the 
holder of a flood insurance policy issued under this Act is 
paying a lower premium than is required under this section due 
to an error in the flood plain determination, the Administrator 
may only prospectively charge the higher premium rate.
  (g) Frequency of Premium Collection.--With respect to any 
chargeable premium rate prescribed under this section, the 
Administrator shall provide policyholders that are not required 
to escrow their premiums and fees for flood insurance as set 
forth under section 102 of the Flood Disaster Protection Act of 
1973 (42 U.S.C. 4012a) with the option of paying their premiums 
annually or monthly.
  (h) Rule of Construction.--For purposes of this section, the 
calculation of an ``average historical loss year''--
          (1) includes catastrophic loss years; and
          (2) shall be computed in accordance with generally 
        accepted actuarial principles.
  (i) Rates for Properties Newly Mapped into Areas with Special 
Flood Hazards.--Notwithstanding subsection (f), the premium 
rate for flood insurance under this title that is purchased on 
or after the date of the enactment of this subsection--
          (1) on a property located in an area not previously 
        designated as having special flood hazards and that, 
        pursuant to any issuance, revision, updating, or other 
        change in a flood insurance map, becomes designated as 
        such an area; and
          (2) where such flood insurance premium rate is 
        calculated under subsection (a)(1) of section 1307 (42 
        U.S.C. 4014(a)(1)),
shall for the first policy year be the preferred risk premium 
for the property and upon renewal shall be calculated in 
accordance with subsection (e) of this section until the rate 
reaches the rate calculated under subsection (a)(1) of section 
1307.
  (j) Premiums and Reports.--In setting premium risk rates, in 
addition to striving to achieve the objectives of this title 
the Administrator shall also strive to minimize the number of 
policies with annual premiums that exceed one percent of the 
total coverage provided by the policy. For any policies 
premiums that exceed this one percent threshold, the 
Administrator shall report such exceptions to the Committee on 
Financial Services of the House of Representatives and the 
Committee on Banking, Housing, and Urban Affairs of the Senate.
  (k) Consideration of Mitigation Methods.--In calculating the 
risk premium rate charged for flood insurance for a property 
under this section, the Administrator [shall take into account] 
shall--
          (1) take into account the implementation of any 
        mitigation method identified by the Administrator in 
        the guidance issued under section 1361(d) (42 U.S.C. 
        4102(d))[.]; and
          (2) offer a reduction of the risk premium rate 
        charged to a policyholder, as determined by the 
        Administrator, if the policyholder implements any 
        mitigation method described in paragraph (1).
  (l) Clear Communications.--The Administrator shall clearly 
communicate full flood risk determinations to individual 
property owners regardless of whether their premium rates are 
full actuarial rates.
  (m) Protection of Small Businesses, Non-Profits, Houses of 
Worship, and Residences.--
          (1) Report.--Not later than 18 months after the date 
        of the enactment of this section and semiannually 
        thereafter, the Administrator shall monitor and report 
        to Committee on Financial Services of the House 
        Representatives and the Committee on Banking, Housing, 
        and Urban Affairs of the Senate, the Administrator's 
        assessment of the impact, if any, of the rate increases 
        required under subparagraphs (A) and (D) of section 
        1307(a)(2) and the surcharges required under section 
        1308A on the affordability of flood insurance for--
                  (A) small businesses with less than 100 
                employees;
                  (B) non-profit entities;
                  (C) houses of worship; and
                  (D) residences with a value equal to or less 
                than 25 percent of the median home value of 
                properties in the State in which the property 
                is located.
          (2) Recommendations.--If the Administrator determines 
        that the rate increases or surcharges described in 
        paragraph (1) are having a detrimental effect on 
        affordability, including resulting in lapsed policies, 
        late payments, or other criteria related to 
        affordability as identified by the Administrator, for 
        any of the properties identified in subparagraphs (A) 
        through (D) of such paragraph, the Administrator shall, 
        not later than 3 months after making such a 
        determination, make such recommendations as the 
        Administrator considers appropriate to improve 
        affordability to the Committee on Financial Services of 
        the House of Representatives and the Committee on 
        Banking, Housing, and Urban Affairs of the Senate.

           *       *       *       *       *       *       *


   CHAPTER III--COORDINATION OF FLOOD INSURANCE WITH LAND-MANAGEMENT 
PROGRAMS IN FLOOD-PRONE AREAS

           *       *       *       *       *       *       *


                  criteria for land management and use

  Sec. 1361. (a) The Administrator is authorized to carry out 
studies and investigations, utilizing to the maximum extent 
practicable the existing facilities and services of other 
Federal departments or agencies, and State and local 
governmental agencies, and any other organizations, with 
respect to the adequacy of State and local measures in flood-
prone areas as to land management and use, flood control, flood 
zoning, and flood damage prevention, and may enter into any 
contracts, agreements or other appropriate arrangements to 
carry out such authority.
  (b) Such studies and investigations shall include, but not be 
limited to, laws, regulations or ordinances relating to 
encroachments and obstructions on stream channels and 
floodways, the orderly development and use of flood plains of 
rivers or streams, floodway encroachment lines, and flood plain 
zoning, building codes, building permits, and subdivision or 
other building restrictions.
  (c) On the basis of such studies and investigations, and such 
other information as he deems necessary, the Administrator 
shall from time to time develop comprehensive critera designed 
to encourage, where necessary, the adoption of adequate State 
and local measures which, to the maximum extent feasible, 
will--
          (1) construct the development of land which is 
        exposed to flood damage where appropriate,
          (2) guide the development of proposed construction 
        away from locations which are threatened by flood 
        hazards,
          (3) assist in reducing damage caused by floods, and
          (4) otherwise improve the long-range land management 
        and use of flood prone areas,
and he shall work closely with and provide any necessary 
technical assistance to State, interstate, and local 
governmental agencies, to encourage the application of such 
criteria and the adoption and enforcement of such measures.
  (d) Flood Mitigation Methods for Buildings.--The 
Administrator shall establish guidelines for property owners 
that--
          (1) provide alternative methods of mitigation, other 
        than building elevation, to reduce flood risk to 
        residential buildings that cannot be elevated due to 
        their structural characteristics, including--
                  (A) types of building materials; [and]
                  (B) types of floodproofing; [and]
                  (C) with respect to buildings in dense urban 
                environments, methods that can be deployed on a 
                block or neighborhood scale; and
                  (D) elevation of mechanical systems; and
          (2) inform property owners about how the 
        implementation of mitigation methods described in 
        paragraph (1) may affect risk premium rates for flood 
        insurance coverage under the National Flood Insurance 
        Program.

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