For years, subsidized flood insurance rates allowed financing for the construction of millions of homes and businesses in flood-prone areas around the U.S.
To shore up the finances of the National Flood Insurance Program in the wake disasters like Hurricane Katrina, the Biggert-Waters Flood Insurance Reform Act boosted flood insurance premiums in October by an average of 10 percent.
But much more dramatic increases are being imposed on second homes and rentals built before communities adopted their first Flood Insurance Rate Map (FIRM) to take into account the “true risk” of flooding. Subsidies are also being lifted on “Pre-FIRM” homes that have experienced repeated flood losses.
The upshot can be “serious sticker shock” for buyers. On James Island, S.C., Hal Jones thought he had a buyer lined up to pay $420,000 for for his aunt and uncle’s home. But the buyers backed out when they found flood insurance would cost $12,000 to $18,000 a year, compared with $1,000 a year before implementation of Biggert-Waters, The Post and Courier reports.
Jones’ agent, Trademark Properties Realtor Carol Newman, and local officials worry that premium increases will force many retirees to sell their homes, and help trigger the next crash in real estate. Similar predictions are being made in flood-prone areas around the country. About 20 percent of the 5 million properties covered by the National Flood Insurance Program are subsidized, the New Orleans Times-Picayune noted in an editorial calling on lawmakers to support a proposal to delay rate hikes by four years.
The National Flood Insurance Program is more than $20 billion in debt, and last year lawmakers balked at continuing it without reforms. Although the National Association of Realtors lobbied for passage of the Biggert-Waters reform bill, NAR is now calling for a four-year “timeout” on rate hikes. Source: postandcourier.com.
