Rate hikes could swamp floodplain homeowners
September 15, 2013
By PETER GUINTA
A federal law intended to make the National Flood Insurance Program pay for itself may instead devastate the real estate market and push thousands of people out of their homes.
The Biggert-Waters National Flood Insurance Act goes into effect Oct. 1 and will affect at least 1,200 homes in St. Johns County and thousands more statewide.
It was designed to end government flood control and make the flood insurance program self-sustaining.
Right now, the program is $24 billion in debt.
Congress wants to end the bleeding.
But the law’s practical effect will be to significantly raise flood insurance rates over the next five years, and perhaps longer, meaning that premiums on high-risk properties will skyrocket.
Wayne Johnson, an agent with Great Florida Insurance of St. Augustine on U.S. 1 South, said his company has many local flood insurance customers.
“We don’t know all the repercussions (of this law) yet,” Johnson said. “(But) the pain is going to be really bad for many people.”
According to Doug Wiles, former state legislator and owner of Herbie Wiles Insurance on U.S. 1 North, much of the St. Augustine area is in a special flood hazard zone.
“What’s going away (under the law) are the less expensive premiums for older houses built prior to (1974),” Wiles said. “(Flood) insurance premiums could go up 25 percent a year until the National Flood Insurance Program deems that its rates are actuarially sound.”
St. Johns County maps show flooding plains the length of the county north and south along the Atlantic Ocean to the east and the St. Johns River to the west. Also vulnerable are the basins of Deep Creek, Mill Creek, Durban Creek and Six Mile Creek. Hastings also sits amid a large flood-prone area.
Wiles said, “We’re working with our customers on a case-by-case basis.”
Mayor Kevin Ruane of Sanibel, Fla., in Lee County sent a warning letter Sept. 5 to St. Augustine Beach Commissioner Andrea Samuels — the Beach’s liaison with the Florida League of Cities — outlining “impending negative impacts” of the new law.
Ruane said the bill will “increase flood insurance premiums for some Florida homeowners more than tenfold from approximately $2,500 a year to as high as $30,000 a year. Without modification, the law will result in widespread hardship for more than 268,000 Florida property owners,” he said.
Ruane said the law will “damage our real estate market, stifle economic development and reduce the tax base.”
Potential homeowners may shy away from a new purchase when flood insurance costs are $10,000 a year and rising every year after, he said.
Homes with existing mortgages that require flood insurance could be lost to foreclosure.
Ruane said that Florida appears to be a donor state.
“Since the inception of (that program), Floridians have paid over $16 billion into the program and have collected just $4.5 billion in claims,” he said.
A Louisiana television station reported that after a public meeting outlining the new flood insurance law to 200 homeowners in St. Charles Parish, residents came to the front table and dropped their house keys on the table in front of federal officials, many saying, “If you want my house, take it.”
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