Nixed Flood Insurance Subsidy Drowns Coastal Home Values

In Florida, Louisiana, New York and other coastal states, many homeowners are in shock at new flood insurance rates that are rapidly approaching. After Hurricanes Katrina and Sandy left the National Flood Insurance Program $24 billion in the red, Congress revamped the program—phasing out subsidies. One group especially upset are new homeowners—people who bought a property and are now seeing their flood insurance costs skyrocket, making the property no longer affordable.

Copyright © 2013 NPR. For personal, noncommercial use only. See Terms of Use. For other uses, prior permission required.

ROBERT SIEGEL, HOST:

Scientists consider extreme weather to be a direct result of climate change, and the National Flood Insurance Program is about to revamp its rules thanks to some particularly damaging weather. The program is $24 billion in debt after payouts over Hurricane Katrina and Superstorm Sandy. For some who live near rivers or the coast, changes to the program will result in big rate increases. As NPR's Greg Allen reports, the hike threatens to price people out of their homes.

GREG ALLEN, BYLINE: Larry Bellinger(ph) owns a modest two-story house in St. Petersburg, Florida, on a cul-de-sac not far from the Gulf of Mexico.

LARRY BELLINGER: As you can see, this is not waterfront property, and everybody believes the flood insurance is for those people on the water or close to a lake or something like that.

ALLEN: Bellinger's home is five houses up from the water. He purchased it and worked with his son to rehab it for resale.

BELLINGER: You know, I'm - we're going to rent this out and...

ALLEN: Stepping into the house, Bellinger points to the new kitchen and polished terrazzo floors, features he thought would help it sell quickly. But when he put it on the market, he was shocked when he found out how much a buyer would have to pay for the property's flood insurance.

BELLINGER: On this house for $250,000 of insurance, the rate was going to be $45,663 and some odd cents per year. Well, you know, you can buy this house in five years on that.

ALLEN: Last year, Congress reauthorized the National Flood Insurance Program at the same time it passed a law to phase out subsidized insurance rates. Only about a fifth of the property owners in the program pay subsidized rates, but that's still more than a million properties that were grandfathered in when the program was developed. In Pinellas County, where Bellinger lives, more than 50,000 properties will eventually see big increases. For now, the flood insurance costs are rising for businesses, owners of investment property and recent buyers.

For people who live in their homes, rates likely won't go up until the house is sold. While few will see hikes as large as Bellinger's, increases several times the current rate are likely. In communities like St. Petersberg, the angst is growing. The city's mayor, Bill Foster, recently went to Florida's governor to ask for help lobbying Washington. At a cabinet meeting, he said he didn't question the need to reform the flood insurance program, but he and many others say Congress botched the job.

MAYOR BILL FOSTER: It seemed like a good idea at the time, and it was, but the way the implementation is being proposed, it will indeed have a devastating impact on St. Peterserg, Pinellas County and on all Floridians.

ALLEN: And it's not just Florida. In New York, Massachusetts, Louisiana, even Iowa, homeowners and their elected officials are working to pressure Congress to rethink or at least delay the rules imposing the new flood rates. A number of bills have been filed but Florida Senator Bill Nelson says they're on hold, collateral damage from the gridlock over Obamacare and a possible government shutdown.

SENATOR BILL NELSON: So what we're trying to do is to get bipartisan support to join us, to pass a clean bill as soon as we can delay those rate increases.

ALLEN: With the increases set to take effect Tuesday, that looks unlikely, and the new rules are already having an impact in communities like Fort Myers Beach, where realtor Karen Swanbeck(ph) lives. She says with the new rates, her $1,200 annual flood insurance bill may top $10,000. It's leading some residents, especially those on fixed incomes, to wonder if they'll be able to stay in their homes. At the same time, she says, they also wonder if they'll be able to sell.

KAREN SWANBECK: If these rates or anything close to this stays in effect, the chance of people purchasing with mortgages involved will greatly diminish. I think most people, you'll end up selling a majority of the properties to cash buyers who will choose to self-insure.

ALLEN: Some predict the new rates will lead to lower home values, depressed sales and even a new round of foreclosures in some coastal communities. Mississippi's insurance commissioner this week went to federal court seeking an injunction to stop them from taking effect, and with next week's deadline approach, angry homeowners are planning a series of rallies tomorrow in several states, including New Jersey, Vermont and Hawaii. Greg Allen, NPR News, Miami.

Copyright © 2013 NPR. All rights reserved. No quotes from the materials contained herein may be used in any media without attribution to NPR. This transcript is provided for personal, noncommercial use only, pursuant to our Terms of Use. Any other use requires NPR's prior permission. Visit our permissions page for further information.

NPR transcripts are created on a rush deadline by a contractor for NPR, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of NPR's programming is the audio.

Comments

 

Please keep your community civil. All comments must follow the NPR.org Community rules and terms of use, and will be moderated prior to posting. NPR reserves the right to use the comments we receive, in whole or in part, and to use the commenter's name and location, in any medium. See also the Terms of Use, Privacy Policy and Community FAQ.

Support comes from: