The wave of flood-insurance sticker shock that's sweeping across the U.S. didn't originate with Hurricane Sandy. But a year after the one of the most devastating storms in U.S. history, homeowners in Sandy-ravaged regions of the East Coast have been among the first to feel its impact -- and loudly voice their protests. Even as those still rebuilding from the storm (pictured above battering the Rhode Island coast) complain of low-ball insurance payouts and government red tape, others are sounding the alarm about rate hikes that went into effect this month.
Property owners who've already been buying federally subsidized flood insurance are seeing their rates go higher, sometimes very much higher. As maps of flood-prone areas are reevaluated and redrawn, they're soon to be joined by many others in other flood-prone regions of the country -- many of whom might not even know that they're now at risk of flood -- or of having to buy prohibitively expensive flood insurance.
AOL Real Estate recently carried the accounts of those in newly designated "high-risk" flood zones as seeing their annual flood insurance premiums multiply from the hundreds into the thousands. And this past week at a meeting in Middletown, N.J., a local official decried the choice given hundreds of its citizens -- between raising their homes to a higher elevation or paying higher insurance rates -- as part of a "national Ponzi scheme" by the federal government. Middletown Patch further quoted officials there as saying that residents face insurance premiums of up to $31,000 a year if they fail to comply.
"We're not alone here in Middletown," said Committeeman Anthony Fiore. "This is happening up and down the coast of New Jersey. It's happening in New York. It's happening in Mississippi. It's happening all over the place."
In Mississippi, that state's insurance commissioner filed a lawsuit in September to block the rate hikes, which he says could be as high as 3,000 percent, and in Florida, officials have pledged to file a legal brief in support. "The ripple effect that we're going to be feeling in Florida and other coastal states, I don't think anybody thought ahead about that," Pam Dubov, the appraiser of Pinellas County, Fla., told The Associated Press.
Meanwhile, Bloomberg reported Thursday that reassessed rates are sending a chill through the residential real estate market. "We were getting five or six showings a week," it quoted Wendy Lockhart, a St. Petersburg, Fla., real estate agent as saying. "Then when all this started hitting the front pages about three weeks ago, we've had no showings." Lockhart also told the news service that because her insurance premium rose "from about $1,000 to $8,105," she's now having difficulty selling her own home.
Also this week, CNN quoted the president of the Massachusetts Association of Realtors as saying that the flood insurance cost is driving homebuyers away there, too. "We don't have hard numbers yet, but we have a lot of anecdotal information about lost deals," said Peter Ruffini. "Our company has lost several." A Realtor in New Jersey told the cable channel, "For every $5,000 a year your flood insurance goes up, you're losing $100,000 in property value."
The flood insurance rate hikes that went into effect on Oct. 1 were put in place by Congress months before Sandy struck -- in reaction to disasters such as 2005's Hurricanes Katrina and Rita that brought so many claims that the federally financed program to insure flood-zone properties faced insolvency. The Biggert-Waters Flood Insurance Reform Act, passed in July 2012, instructed various federal agencies to figure out how to keep the National Flood Insurance Program funded and running efficiently, and set a schedule of yearly insurance-rate hikes that would eventually eliminate the subsidized premiums for many property owners. It also called for updated maps of flood-prone regions.
Although it passed easily, there's now a movement in Congress to delay or alter Biggert-Waters, with even co-sponsor Rep. Maxine Waters of California expressing dismay at the level of rate hikes and urging that they be delayed. The head of the Federal Emergency Management Agency, which is running the program, also has told Congress that he's concerned about the poor and middle class being "priced out of their homes." But he said that FEMA's hands are tied until Congress changes the legislation.
FEMA's FloodSmart website has links to local flood maps, including information about maps that are scheduled to be updated. The site also allows homeowners to determine their current risk levels as it directs them to agents selling NFIP policies in their areas. For those in flood zones, the slideshow below looks at the kinds of properties now affected by the Biggert-Waters Flood Insurance Reform Act.
FACING HIGHER FLOOD INSURANCE PAYMENTS:
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