Florida faces ruinous flood rate hikes

Herald/Times Tallahassee BureauSeptember 30, 2013 

On the same day much of the federal government grinds to a halt, more than 268,000 Florida homeowners will face a hit to their pocketbooks because of federal inaction on another front — flood insurance rates.

Gov. Rick Scott, Chief Financial Officer Jeff Atwater and Sen. Bill Nelson have appealed to congressional leaders to delay the Oct. 1 start date of a key provision of the 2012 Biggert-Waters Flood Insurance Reform Act, a new law that phases out subsidies on older properties in flood zones. Scott plans to hold a news conference Tuesday in Clearwater to demand that Congress fix “the unfair national flood insurance rate hikes on Florida families.”

Under the law, 13 percent of the 2 million homeowners who carry flood insurance in Florida will be affected by the rate increase — compared to 20 percent of all policyholders nationwide.

Those homeowners will see their rates rise 25 percent upon renewal until they decide to sell their homes, and then the new buyer will have to pay the full cost of that insurance — in some cases as much as 3,000 percent more than current rates — to reflect the true flood risk of their property.

The result is having a chilling effect on real estate sales as buyers balk at closing on purchases of older homes that now carry the subsidized rates, said John Sebree, senior vice president of the Florida Realtors Association.

“The impact is going to be huge,” he said, warning that declining home sales could stall Florida’s slowly recovering real estate market. In Miami-Dade County, for example, 47,663 homeowners benefit from subsidized rates, more than 22,000 of them in Miami Beach. In Broward County, 19,551 homeowners will feel the pinch, with the largest impact in Hallandale Beach and Hollywood. And in Monroe County, 11,896 homeowners will be affected.

Under the program, homeowners must hire a surveyor and obtain an elevation certificate to prove their home is not below the base flood plain. Those whose homes are below the base will pay the subsidized rate until they sell their home, allow their policy to lapse or experience a significant loss. Then the massive rates will kick in. The new rates are intended to bring the flood insurance program, which has been running a $24 billion deficit since Hurricane Katrina struck New Orleans in 2005, back into solvency by phasing out subsidies in high-risk zones and updating flood zone maps across the United States over the next five years.

But the phase-in is not slow enough for several members of the Florida congressional delegation, who now say that the impact is not what they intended when the act passed with widespread support in 2012.

“It is absolutely critical that Congress pauses on this long enough to get it right,” said U.S. Rep. Rich Nugent, R-Spring Hill. He filed legislation on Friday to delay the act, urging congressional leaders to add the measure to any continuing resolution needed keep the federal government operating.

Nugent’s proposal is co-sponsored by Rep. Kathy Castor, D-Tampa, and has the support of most members of Florida’s congressional delegation. A similar proposal was filed by Nelson, a Democrat, and Sen. Mary Landrieu, a Democrat from Louisiana, where half of all homeowners have subsidized flood insurance. Nugent’s plan would require that the rate hikes be halted until the Federal Emergency Management Agency completes a study of the rate increases’ impact on homeowners, as required by the 2012 law. But Florida’s junior senator, Republican Sen. Marco Rubio, has not endorsed the delay.

“We support not having the rates go up immediately, and we also recognize need for long-term solution, so we’re looking for a solution that addresses both short- and long-term problem,” Alex Conant, a spokesman for Rubio, said in a statement. Rubio, who has spent the past week joining Obamacare opponents in opposing federal healthcare subsidies, declined requests to explain what he considers a long-term solution to the flood insurance rate hikes and their impact on real estate sales.

FEMA Director Craig Fugate testified last month that Congress was unrealistic in its expectation that an affordability study could be completed by April 2013. He said it would take at least two more years.

If Nugent’s proposal is adopted, it would require FEMA to make recommendations to Congress for new rates if it concludes the new rates are not affordable. Congress then would be required to take an up-or-down vote on the new rates or the existing rates would be automatically delayed. “It’s hard to get Congress’ attention on this,” said Sebree, of the Florida Realtors Association. “They are more focused on whether to fund or defund Obamacare than whether someone is going to be priced out of a home next week.”

Absent congressional action, homeowners and real-estate agents are placing their hopes on a lawsuit filed Friday by Mississippi Insurance Commissioner Mike Chaney. The suit asks a federal judge to block the rate increases until FEMA completes its affordability study. Until then, insurance experts say there are some immediate steps homeowners in high-risk flood zones can take.

“Anybody with a subsidized policy should get an elevation certificate,” said David Thompson, education instructor at the Florida Association of Insurance Agents. “They’ll possibly save money or at least will know what the full rate is if they want to sell their home.”

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