President ready to sign rollback of flood insurance rate hikes
For a real estate market that is stabilizing after years of foreclosures and recession, the new rate hikes would have been a death knell for the coastal real estate market.
By Kevin Brady
Local real estate agents are welcoming a new bill that will give relief to homeowners hurt by the recent overhaul of federal flood-insurance rates.
After months of wrangling, Congress last week approved a bi-partisan compromise bill that rolls back much of last year’s rewrite of the National Flood Insurance program.
The bill, which President Obama indicated he would sign into law, would dramatically reduce increased premiums for flood insurance. And, crucially for those in flood-prone areas wanting to sell their homes, the bill will let them pass on federally subsidized below-market insurance rates to potential buyers.
“I am glad the rates are being rolled back,” said Tricia Argabrite, a local Realtor who has sold homes all over South County and the Bay area. “We definitely saw a lot of people backing away from homes that were in flood zones, and that was one of the first questions we were getting from buyers: ‘Is the house in a flood zone?’”
A different type of buyer, flush with cash and ready to risk buying a home without insurance, also started to appear in the market after rates in flood-prone areas skyrocketed for some homeowners, said Argabrite, an agent with the Argabrite Group.
“We might be looking at a $350,000 house, and I would mention that the current owner was selling because their [flood-insurance] rate was going up to $8,500 a year,” she said. “But, depending on the buyer, a traditional buyer would have to back away from the home because they could not get the financing. It reduced the amount of house they could afford.”
Others looking at homes selling between $300,000 and $400,000, told Argrabrite they would just pay cash for the house and not have flood insurance. She said, “If something happened, they said they would take care of it themselves.”
The Biggert-Waters Flood Insurance Reform Act of 2012 mobilized a national backlash against the new rate increases, as much as 600 percent in some cases, casting a chill over coastal real estate markets from New York to Florida.
Some homeowners were left with monthly flood-insurance rates higher than their mortgage payments.
Those kinds of increases had phones ringing off the hook in Washington, D.C., with irate voters demanding action.
Al Demellier, a South County agent with Century 21 Beggins Enterprises, knows the skyrocketing rates were hurting the market.
“It was upsetting the economy and just hammering the property owners,” he said. “Many were unable to sell their homes because their rates were grandfathered in, but they could not pass on those rates to new buyers. Some people were going from paying $1,200 a year for flood insurance to the new owner having to pay $18,000 a year. It had a profound effect.”
Waterfront communities from New Jersey to Louisiana have enjoyed subsidized flood insurance through the National Flood Insurance Program since the 1960s. Of the NFIP’s 5.6 million policyholders, 1.1 million are subsidized, according to the Federal Emergency Management Board, or FEMA. Florida is the program’s largest customer, with 2 million policies.
However, with the NFIP $24 billion in the red after losses from Hurricane Katrina and other devastating floods, Congress passed the Flood Insurance Reform Act of 2012 in an attempt to restore solvency to the program with insurance rates more reflective of the risk of living on or near the water.
“I understand the federal government may need to address some issues,” Argabrite said, “but you just can’t increase rates like that and not expect any repercussions.”
Argabrite said the new law will help more traditionally financed buyers in the marketplace.
“For a while,” she said, “we had people backing away from homes in flood zones because they were fearful of those rates going up drastically and keep going up.”
Rep. Kathy Castor, a Tampa Democrat whose waterfront district includes Riverview, Apollo Beach and Ruskin as well as Tampa and the southern tip of St. Petersburg, has been lobbying her House colleagues for months on the issue.
“Families who were facing massive flood-insurance premium increases now can breathe easier,” she said. “The measure would cap yearly premium increases while maintaining fiscal protections to ensure that flood insurance will be there in times of disaster.”
For a real estate market that is stabilizing after years of foreclosures and recession, the new rate hikes would have been a death knell for the coastal real estate market, said Lucy Warren, a Riverview Realtor.
“It would have been just another tax on homeowners,” she said. “I was paying $58 for my flood insurance, but that went up to $400. The Congress and the state, it just seems like they are always raising the fees.”
“It’s not everything I wanted for homeowners, but it’s significant protection from unconscionable rate hikes,” said U.S. Sen. Bill Nelson (D-FL), who was joined by fellow Democrats and Republicans from across the state in pushing for the lower rates.