Tampa Bay Times: "...there has to be something better than Biggert-Waters"

New flood insurance rules have consequences for Florida's economy

By: John Romano, Times Columnist

Saturday September 7, 2013

By any reasonable measure, paradise is worth the wait.

So when Colin and Joyce Elston discovered the Pinellas beaches while on vacation from Connecticut in the 1970s, they agreed they would bide their time.

There were three children to raise. And a job opportunity for an industrial scientist of Colin's expertise in Washington. Even a seven-year stopover in the mountains of Mexico where land was cheap and money could be saved.

Yet the Elstons never forgot about the place where the sun was bright and the water stretched beyond the horizon.

So in June, nearly 40 years after they first vacationed in Tampa Bay, the retirees bought a house in Treasure Island and settled in for what they assumed was forever.

Three months later, paradise was interrupted.

The Elstons had never heard of the Biggert-Waters Act passed by Congress in 2012. They had no idea it revamped the National Flood Insurance Program and was about to cause premiums to skyrocket in high-risk areas.

Two weeks ago they discovered the flood insurance they purchased for $1,750 will likely increase 500 to 600 percent in the blink of an eye.

They are waiting for a survey to determine their home's elevation level, but have been told to expect their premium to cost between $10,000 and $12,000.

"Coming here had always been our dream, and everything seemed to work out perfectly for this house,'' Colin said. "It was going to be a stretch for us, but we … knew this could work.

"Now, we don't know what we're going to do. The best we can hope for is bad news. If it turns out to be the worst, it will be impossible for us to live with.''

• • •

The aim behind the Biggert-Waters Act is laudable.

The execution is most certainly not.

Seeking ways to help the Federal Emergency Management Agency climb out from under an enormous deficit built up from storms like Hurricane Katrina, both houses of Congress agreed the federal government would no longer subsidize flood insurance. In other words, homes in high-risk areas would pay the full freight on their premiums.

In theory, this might make sense. In reality, this problem requires a far more nuanced approach.

Come Oct. 1, any business in a high-risk area will immediately lose its flood insurance subsidy. Any home sold after Oct. 1 will also lose its subsidy. And — to the horror of the Elstons — any home sold after Biggert-Waters passed last summer will lose its subsidy.

For everyone else in high-risk areas, it's more like a slow water torture. Their premiums will increase 20 percent every year until their policies are no longer subsidized.

Admittedly, there is a certain appeal to someone paying the true cost of their home's risk, as opposed to being bailed out by other taxpayers.

But that simplistic approach ignores some important truths.

No. 1, Congress has essentially changed the rules in the middle of a game. You can't provide subsidized insurance for decades, then pull the rug out from under people in a matter of months. That's sort of like telling a politician that campaign donations are simply bribes by another name, and so they will have to fund their own election bids starting in 2014. Not too realistic, huh?

No. 2, even if you are devoid of empathy, the ramifications of this law will impact Florida and other coastal states far beyond insurance premiums. The real estate market will take an enormous hit if high-risk homes become unsellable due to insurance rates. Property values will begin to drop, which will affect tax revenues.

It's easy to say that rich people on the beach should have seen this day coming, but what about families in modest inland homes that are in high flood zones? What about homes that have just been redrawn into flood zones by FEMA?

"There's a much bigger picture here,'' said Anita Ford, a St. Petersburg insurance agent. "It's not just, 'Gee you have a nice waterfront house, why don't you step up to the plate and pay what you owe?'

"We were told St. Pete has more parcels in high-risk zones than the top two beach communities combined. It's ludicrous to think this is just impacting a few rich people.''

• • •

So is there a solution?

Maybe not a perfect one, but there has to be something better than Biggert-Waters.

Getting rid of the retroactive home sales clause would be a start. And increasing the maximum deductible for high-risk homes so flood insurance essentially becomes catastrophic insurance is another idea.

Lawmakers in Louisiana have been screaming about the law for months now, and there is talk of delaying its implementation as well as introducing new legislation. Unfortunately, most politicians in Florida have been shamefully low-key on the topic.

The bottom line is real estate agents are worried. Local officials are worried. Homeowners are downright frightened.

It would be nice if our congressional representatives had the guts to stand up and defend homeowners, or else look them in the eye and explain why they don't see this as a problem.