Flood-insurance rate hikes likely will be delayed
WASHINGTON — To the relief of property owners and homebuyers in low-lying parts of Florida, Congress is moving quickly to delay a huge increase in flood-insurance rates, sparing many from paying hundreds or even thousands of dollars a year.
Across the state, owners and insurance agents welcomed a reprieve from higher rates they fear would cripple the state’s housing recovery and devastate property values in coastal communities and along inland l akes, canals and
riverbanks.
It’s not a done deal. But a bill filed in the U.S. Senate on Tuesday and backed by members of both parties in the House showed a will in Congress to halt the higher rates for four years and assess their impact.
“They [members of Congress] are starting to realize that people cannot possibly afford to choke down some of these rates,” said John Wilson, an agent in Winter Park for the Insurance Group of Central Florida. “Some of them are just incredible increases. Something certainly needs to be done.”
Pressure from states such as Florida, home to 37 percent of the nation’s flood-insurance policies, prompted members of Congress to try to undo or delay legislation passed last year with bipartisan support. The law phases in rates that reflect the actual cost of insurance instead of providing government subsidies. The new rates began phasing in this year and took effect for many owners Oct. 1.
Most policyholders face relatively small increases in premiums. But unless the new rates are delayed, tens of thousands of Florida homeowners in the riskiest places would pay increases of 25 percent a year starting this year until they reach the full- risk rate. In some of the most extreme cases, insurance would cost as much as 10 percent of the property’s value, according to federal officials.
Jonathan D. Rausch, an insurance agent in Pembroke Pines, was able to tell a condo group in Hollywood that if the new rates are delayed, the owners could renew their lapsed policy for $5,126 instead of $36,584, which is what they faced under new rates.
Business properties, second homes and property repeatedly damaged by floods will gradually lose their subsidized rates under the current law. Buildings with lapsed policies and homes sold after the new law was signed in July 2012 face the full-risk rate, prompting Gov. Rick Scott to warn that the shock would devastate Florida real estate.
The new law had sailed through Congress last year — one of its few accomplishments — to make the National Flood Insurance Program solvent after running up a $24 billion deficit.
The program was created in 1968 after a costly batch of floods prompted Congress to provide cheap insurance at subsidized rates rather than send di- saster aid. But after a decade of hurricanes and big deficits in the flood program, lawmakers last year decided to impose full-risk rates.
New flood maps, meanwhile, put tens of thousands of homeowners in Central Florida in flood zones for the first time. New proposed maps in Broward County, on the other hand, took many residents outside the riskiest flood zones. The designation is crucial because lenders require insurance for property in the riskiest areas.
“My house is by a road, another set of homes and then a small retention pond. The retention pond is 2 feet deep. My dog goes into that retention pond, and his stomach doesn’t get wet,” said Mike Kirby, 56, of Longwood. “But I’ve been forced to get flood insurance.”
Kirby, who pays $900 a year, was grateful for word that the increased rates may be delayed.
“They need to think everything out and look at all the consequences of something before they throw it out there,” he said.
The bipartisan legislation would delay the rate increase while the Federal Emergency Management Agency looks closely at the impact.
Proponents say the law is needed and should not be delayed because it spares taxpayers from subsidizing insurance and discourages development in vulnerable places. But many in Florida say they should not face a sudden rate increase on existing property after playing by the rules.
“The thinking is that if people can afford the house, they can afford the insurance. But that’s not necessarily true,” Wilson said. “It may very well be that it shouldn’t be a problem for somebody in Orange County that somebody else decided to buy a house on the beach. But the problem is, how do you rein that back in?”