No relief yet for flood rate woes

By Steve Estes

Efforts to get Congress to back off on implementation of the Biggert-Waters Act of 2012, a bill that could well cause an increase of millions of dollars in premiums for flood insurance just in the Keys, to say nothing of the thousands of other coastal communities affected, have stalled.

Sponsors of a bill that would have declared an immediate four-year hiatus on implementation of the potentially economically damaging measure have faced increasing resistance from their colleagues, primarily those in non-coastal states, to the delay of the implementation.

The Congressional committee dealing with the ramifications of the Biggert-Waters Act has declined to advance any amendments as yet, while Senators have tried to add some amendments to the Defense Re-Authorization Bill to speed up the process. There has also been no movement on that front and with just days remaining in the legislative calendar for this year, it appears as though the flood insurance premium rate hikes will become reality.

Only one Florida Senator is on board at the moment to support delay or amending the new rules for flood insurance.

Sen. Bill Nelson has been behind the attempt to add an amendment to the defense bill while Sen. Marco Rubio has asked for more cases of potential premium hikes because his aides report that Rubio is concerned that any delays in revenue increases for the flood insurance program would simply put it further in the hole. That even though Florida accounts for more than one-fourth of all federally subsidized flood insurance policies in the country.

Under the terms of the Biggert-Waters Act, federal subsidies for pre-FIRM homes, commercial properties and second homes are to rise to actuarial rates over the next five to 10 years.

For owner-occupied, single-family homes that either don’t change hands or allow policies to lapse or suffer losses greater than 50 percent of the home’s value, flood rates will remain stable other than thwe normal 10 percent or so yearly increase.

But if the policy lapses for any reason, or the home changes hands, new premiums will go into effect that will be based on the home’s distance above or below flood plain.

Those ground level homes built prior to Jan. 1, 1975 that are now below the flood plain could see increases of more than 500 percent in some cases if new policies are needed.

Second homes, commercial and rental properties are expected to see yearly 25 percent increases in premium costs until the rate reaches what is as yet an undetermined actuarial rate.

Post-FIRM homes and others that are already on stilts and rated by elevation should see less of a kick when a new premium is quoted, other than the yearly six or seven percent increase that has become standard.

Local real estate professionals say that the potential increases in flood insurance premiums have already begun to sink home sales deals in the Keys on many ground-level structures as buyers walk away from flood premiums that in some cases are as much each month as the mortgage payment. They also report that median-priced ground level home sales are already showing trends of becoming a cash-only buy where the buyer doesn’t have to carry flood insurance.

Flood insurance is a requirement to obtain a mortgage backed by any federal agency, but with no mortgage comes no flood premium.

That doesn’t actually help the overall health of the market, however, said local insurance activist and County Commissioner Heather Carruthers recently as she pointed out that an investor who purchases on cash is eventually looking to sell at a profit, and if the buyer needs a mortgage, the future deal would go south, making the home worth less today anyway.

Monroe County officials, as well as other local governments around the coastal US, plan to start banging on Congressional doors early next year to push the need for the affordability study that was called for in Biggert-Waters but never completed, and to discuss delaying implementation while ramping up mitigation for affected homes.