Homeowners in many areas will be hit hard as flood insurance rates skyrocket as a result of the Biggert-Waters Flood Insurance Reform Act, and Pinellas County has approximately 50,000 properties targeted to lose the subsidized rates – more than any other county in the nation.
As of now, this law is being rolled out in stages but the reform removes subsidies from policyholders for their federal flood insurance premiums, remaps the flood zones, and makes a number of other changes to the National Flood Insurance Program.
Many believed that the new rules were being put in place because of what happened as a result of Superstorm Sandy, but this act passed months before Sandy hit our Atlantic coast.
The impact of the Biggert-Waters Flood Insurance Reform Act has been one of national concern, and many will be directly affected by this law in a major way. The increase in flood insurance translates to thousands or tens of thousands of dollars for each home and, new homes purchased after July 2012 are now completely ineligible for flood insurance subsidies.
Congress originally created the NFIP as a result of Hurricane Betsy’s wrath on New Orleans back in September, 1965. Flood insurance was nearly impossible to purchase from private carriers after that storm but lawmakers felt the federal government had a duty to protect consumers in the coastal areas. The NFIP was supposed to be self-sustaining, but fast-forward to 2005 and the NFIP sat 24 billion dollars in debt.
Congress was attempting to overhaul the program when it passed the Biggert-Waters Act last year.
Here is information on the changes in the flood program, directly from FEMA:
Apparently, even some of the people who voted to pass this legislation are now nauseated by the effects on everyday homeowners, business owners, and seniors. U.S. Congresswoman Maxine Walters, the co-author of the act, issued a press release that shows she is outraged by the impact on homeowners, “Neither Democrats nor Republicans envisioned this would reap the kind of harm and heartache that may result from the law going into effect.”
Residents and realtors around the country have pulled together to urge Congress to at least delay the flood insurance rate increases. Consumers who live in a flood zones are those on the water and include those that are far more inland but are still on the flood maps. This often includes homes that do not get ocean breezes or views of sparkling sunsets on the Gulf, but these homes are within some proximity to a tidal body of water. The insureds directly affected are not all millionaires in mansions but nevertheless, these insureds will need to come up with large sums of cash to pay the graduated costs each year as the flood rates increase.
One situation the lawmakers likely did not consider surrounds a property in the flood zone where the owners died and the home is now part of an estate. The family is trying to sell the house to settle the estate, but the contract has fallen through on the sale because of the steep price of flood insurance, new coverage for this home in South Carolina was estimated to be $12,000.00 to $18,000.00.
So what does the new law mean for the real estate market? It spells trouble. Critics say people are not going to purchase homes in flood zones if they have to mortgage the home. Willing cash buyers will still buy the properties, but will likely reject paying the high rates and just run the risk of a flood loss. As a result, NFIP is not going to get out of debt, especially if the owners of property along the coast pay off the mortgage holders (the only entities that required you to have flood insurance) and just save a portion of that money for the big flood. Meanwhile homes in many areas, especially Pinellas County, Florida, will be abandoned and vacant when the foreclosure proceedings begin.
The NFIP has begun a study on the affordability of repealing the subsidies, and Senate Majority Leader Harry Reid says there will be an early 2014 proposal to delay the rate hikes, but this is a very important issue that Floridians can’t just sit on their hands and wait and see how it turns out. The Tampa Bay Times has conducted a poll of registered voters in Pinellas and Hillsborough County about the increased flood rates. On Tuesday, the results of the poll were published, but, in sum, Jeff Harrington reports:
Whether they live in Hillsborough County or Pinellas County, whether they live in homes that were losing lower, subsidized rates or not, a clear majority of registered voters polled earlier this month oppose the Federal Emergency Management flood rate hikes. (emphasis added).
On December 17, Senator Jeff Brandes proposed a bill for Florida to create a market for private flood insurance to compete with the National Flood Insurance Program. The Tampa Bay Times reported about this bill here.
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