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Flood insurance changes run into resistance

By Andrew Taylor

Associated Press

Published: Wednesday, July 3 2013 9:02 a.m. MDT

FILE - This Oct. 30, 2012 file photo shows a boat floating in the driveway of a home on Long Island in the flooding aftermath of Superstorm Sandy, in Lindenhurst, N.Y. Protests from homeowners facing higher flood insurance premiums because of reforms in 2012 are inspiring coastal lawmakers to press for delays that would preserve subsidized, below-cost rates for hundreds of thousands of people in flood-risk areas.

Jason DeCrow, File, Associated Press

Enlarge photo»

WASHINGTON — Just a year after Congress imposed significant changes in the government's oft-criticized flood insurance program, howls of protest from homeowners facing higher premiums have coastal lawmakers pressing for delays that would preserve below-cost rates for hundreds of thousands of people in flood-risk areas.

The government can't say how many people could confront higher premiums, but homeowners in places like Staten Island, N.Y., along the battered New Jersey coast and in low-lying areas of Louisiana, Florida and Texas face the prospect that new government surveys could produce flood insurance premium increases so big that they could be forced from their homes or see their market value plummet.

"That's insane," said Robert Taylor, a homeowner in Des Allemands, La. Taylor said the new law and flood survey would bump his premiums from $400 to more than $28,000 a year. "This community has been here since 1923 and has never, ever flooded. Ever."

At issue is a premium spike driven by a new flood map from the Federal Emergency Management Agency that says Taylor's home is 6 or 7 feet below flood stage. The map, however, doesn't take into account a levee built 80 years ago by the local government that protected the community through hurricanes Katrina, Rita and Isaac.

The federal flood insurance debate is the intersection where efforts to root out waste and abuse run into real-world impacts on people. The aim is to end taxpayer bailouts of the flood insurance program, even if the overhaul forces people from their homes, reduces real estate values and alters the fabric of communities.

FEMA estimates that about 20 percent of its 5.5 million policyholders — about 1.1 million — receive subsidies. About 250,000 of them will see immediate increases: business owners, those owning second homes and people with frequently flooded properties. An additional 578,000 policyholders living in hazardous areas will retain their subsidies until they sell their homes or suffer severe, repeated flood losses. The same is true for people in condominiums.

The program, which has required $24 billion in bailouts since being established in 1968, had drawn withering criticism for its below-market insurance rates and the billions of dollars in losses from repeat claims on homes and businesses flooded every few years.

Last year's revision of the program was one of the few things that virtually everyone from tea party Republicans to liberals like Rep. Maxine Waters, D-Calif., could agree on: It was time to bring soundness to the program by charging people insurance rates that reflect their risk of being flooded.

Now comes the implementation. Starting late next year, FEMA will no longer grandfather in below-market rates for people whose older homes were built to the flood code in previous years or decades ago but have been judged to be at greater risk under new flood maps.

Already, people are paying higher rates for second homes. In October, rates on businesses in flood zones and homes that have been severely or repeatedly flooded will go up 25 percent a year until the rates represent the "true risk" of flooding. And subsidized rates will lapse when a home is sold or flooded repeatedly.

The changes have sparked enormous controversy in places like Louisiana, New Jersey and Florida, where subsidized flood insurance has been a staple of the economy for decades. In some areas, home values have plummeted because of uncertainty over insurance rates. Home sales are falling through because subsidized rates can't be passed on to the buyer. And some homeowners have learned that new flood maps will send their premiums skyrocketing.

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