Tucked away on the west side of the small town of Broad Channel in the middle of Jamiaca Bay is a narrow, dead end, street that goes by the name of West 12th Road. Those of us who live there know that the nice part about living in a small town is that when you are not quite sure what is going on, someone else always does!
[Peter J. Mahon West 12th Road, Broad Channel]
The flood insurance challenge is a lot like Rockaway roads: full of potholes. Some holes are being filled but caution signs are still out there. And, as people in Rockaway know, some potholes become sink holes.
On Tuesday, the House of Representatives in an overwhelming 306-91 vote approved the Homeowner Flood Insurance Affordability Act, a bill constructed to fix some of the potentially devastating terms that came with the Biggert-Waters Act passed in 2012. Previously, in January, the Senate had passed legislation which essentially called for the delay of Biggert-Waters. The House version, however, includes specific remedies and will now move to the Senate for a vote.
Although certain tweaks and adjustments can be made by the Senate, the 306 House votes indicate countrywide and nonpartisan support. If it passes the Senate, the next step would be getting the President to sign on, which is likely.
Important changes in the legislation include:
Restoration of grandfathered rates. Houses built to code at the time of the last flood map (1983) will continue to enjoy a subsidy. For example, a property in a lowrisk X Zone scheduled to move to the much more expensive A zone will keep the low-risk rate as long as a policy is in place. That same rate can transfer to a buyer.
Grandfathering should help stabilize and strengthen the real estate market. The Bigger-Waters Act called for new owners to immediately pay actuarial rates or full risk rates which in many cases meant many thousands of dollars. The prospect of paying such yearly premiums put a chill on real estate markets across Rockaway and large parts of the country.
This was the case in A zone properties as well. Biggert- Waters directed FEMA to charge new buyers full actuarial rates immediately upon sale. So, if a property owner was in an A Zone paying $2000 per year and was on track to eventually pay $10,000 per year through yearly increases, a buyer would get no such break. The buyer would be responsible for the $10,000 per year rate as soon as closing occurred.
The new law would allow for new owners to pick up the seller’s policy rate and assume the yearly increases.
Long-time A zone property owners will not benefit from grandfathering but may have some relief. Biggert- Waters called for 20 percent annual increases until the policy reached actuarial or true risk rates. The new legislation caps increases at 18 percent per year. While the 2 percent difference is meager, the new bill states that FEMA, which oversees the National Flood Insurance Program (NFIP), “must strive to keep flood insurance policies under one percent of a property’s total coverage,” meaning the federal government shouldn’t charge more than $1,000 a year for a $100,000 flood insurance policy. Or $2500 for $250,000 of coverage.
It is with such language that caution is called for. How FEMA will “strive” without specific orders is unclear. FEMA has come under fire for mismanagement, poor mapping, favoritism, and general inconsistency in the implementation of flood regulations.
Other relief may come in the way of deductibles and payment plans. The House bill calls for the NFIP to offer policies with $10,000 deductibles. (An owner will pay the first $10,000 towards damages before any insurance is paid.). A higher deductible usually means lower premiums.
The bill instructs the NFIP to offer monthly and semi-annual payments. Current policies are billed annually, a pay-all-at-once system. Most policies will come with $25 surcharges which is designed to boost NFIP coffers. Some members in Congress stated this surcharge will allow the new legislation to be a costfree amendment.
The bill also instructs FEMA to complete the affordability study it was mandated to do in Biggert-Waters. Further, FEMA must provide a plan of how to offer assistance to flood insurance policy holders based on their financial ability to pay. Furthermore, the bill authorizes FEMA to consider flood mitigation measures besides elevating the house when setting its premiums.
The House bill offers no relief to second homeowners and businesses
It was almost a year ago, The Wave, for the first time its 120 year history, put its editorial on the front page calling attention the grave implications of Biggert- Waters.
Few knew that Rockaway and Broad Channel were in the crosshairs of the Biggert-Waters Act, a law devised with the intention of fixing the National Flood Insurance Program. Few knew how the law could destabilize communities and affect owners and renters alike. It was these unintended consequences that sparked a nationwide call for change. Residents of Rockaway, Broad Channel, and Tom’s River, New Jersey were among the first to draw attention to the dangers of the new law.
It was soon learned that Congress voted to make Biggert Waters law before ever getting a look what FEMA and the National Flood Insurance Program had in store for homeowners and businesses located in flood zones.
Many Rockaway residents were looking at rates that would climb to $9500; others were looking at rates that could soar to $20,000 per year.
The charts FEMA made public six months after Congress passed the bill revealed seemingly dire numbers. The sample chart indicated that an annual rate of $9500 would be charged to a homeowner with a first floor 4 feet below the advisory flood level or base flood elevation. It was time to find get out the glossary and figure out what all this meant.
The base flood level established for much of Rockaway is between 10-12 feet, similar to how many feet above sea level a first floor (including the basement) should be. If, for example, the street was 8 feet above sea level the first floor of useable space had to be four feet above the street, in order to reach the 12 foot advisory level and avoid steep premiums.
Many houses, however, have basements. If the ground floor of the basement was 4 feet below the street level that would make the property 8 feet below the advisory flood level. That 8 feet was double the example FEMA had used. In that scenario, the premium would be twice the $9500 a year, or $19,000 per year for $250,000 of coverage.
A FEMA supervisor visited The Wave in February, 2013 and said, “I wish I had good news, but I don’t.” He went on to say that the best solution might be to elevate houses and that government grants might help cover the costs.
The Wave alerted residents and from there elected officials started getting calls. Soon thereafter so did hundreds of colleagues in both bodies of Congress.
So, is there a bottom line? What does this all mean? The new legislation offers relief to be sure, however, there are plenty of problems and gobs of uncertainty. Perhaps the most hopeful bit of news is everyone in Congress knows that flood insurance is an issue that resonates throughout the entire country and has economic ramifications for all. Simply, it needs and will get attention.
At the hearing before Tuesday’s vote, numerous representatives said FEMA oversight is needed; numerous representatives called for an audit, challenging FEMA’s actuarial rates. A representative fromWest Virginia cited the example of a man named Richard who bought a house for $150,000 expecting to pay $1000 per year for flood insurance. Just before closing, he was told the premium would be $14,000 per year. Other reps offered similar tales.
The outrage displayed by voters and grassroots groups such as Stop FEMA Now and subsequent debates on the Hill indicates that Congress is now aware of how profound the issue of flood insurance is. The National Flood Insurance Program must be reauthorized in 2017. There should be no surprises as was the case in the aftermath of Biggert-Waters Act.
While the new bill sets specifics, there will be no clear roadmap for Rockaway homeowners. Some properties will be grandfathered. Some properties may still face steep increases though may find relief with higher deductibles or from the findings of the affordability study. Simply, the premiums offered homeowners will vary. Some insurance policies may call for an elevation certificate which could cost homeowners somewhere between $400-800. Some will not.
Again, it is not one-size fits all. A congressional aide told The Wave homeowners should get quotes from different agents. And that they should continue to contact elected officials about the issue.
Some roads will be smoother than others but all have potholes.