Major changes in the reform of the national flood insurance program passed by Congress in 2012 are just now taking effect, provoking a fierce backlash from affected policyholders and real estate interests. Most homeowners with flood insurance have little to worry about, though. At least not yet.
The law made a host of changes in the program designed to accurately reflect the level of risk. The most important change mandates an end to subsidized rates for selected properties in flood zones.
That may be the most important point to keep in mind as the debate over new flood insurance rates heats up: Severe increases will be the exception rather than the rule.
According to the Federal Emergency Management Agency, more than 80 percent of policyholders across the country do not pay subsidized rates. That means 4.48 million of the 5.6 million policies in force across the nation are in the clear. They already pay full-risk premiums and will not see large premium increases.
Even among the remaining 20 percent of policyholders, only one in four will see immediate increases to their premiums. Those involve subsidized policies covering non-primary residences, businesses, and severe repetitive loss properties.
For Florida, these changes are a big deal. The state has more than 2 million of the nation’s flood insurance policies and is by far the biggest contributor to the federal program. Some 269,000 property owners in the state, about 13 percent of those with flood insurance, are affected by the early changes, and some of the hikes are indeed steep.
According to the Florida Keys Keynoter, policies for some ground-level homes in the Keys’ flood insurance program that cost $2,000 to $3,000 a year suddenly cost $30,000 a year or more.
That’s outrageous. Congress should find a way to ameliorate these steep increases. But any changes should be narrowly targeted to help those who need it, including primary homeowners. People should not be priced out of their homes because of sudden insurance increases, particularly middle-class property owners who have lived in their homes for decades.
In addition, the law calls for “affordability” in flood insurance rates, but doesn’t spell out what that means. It would make sense to delay severe hikes until FEMA can define affordability and ensure that its rates meet that standard.
But calls for Congress to make wholesale changes in the law or delay implementation are misplaced. The program is $24 billion in the red and getting worse every year. Anyone owning property in areas prone to flooding should be prepared to pay premiums that reflect that risk — especially in Florida, a state with an extensive coastline development and many homes built at or below what FEMA calls “base flood elevation.”
In the coming years and decades, climate change is expected to bring rising ocean levels that will further endanger coastal properties. Political leaders in Tallahassee and elsewhere in the state may turn a blind eye to the costs of over-development along our coasts, but the federal insurance program — ultimately backed by taxpayers — cannot afford to maintain subsidized flood insurance rates for anyone who wants to live on the water in a home at low elevation. Choosing to live in harm’s way comes with a price tag.
Higher flood insurance rates are an inevitable result of ignoring the dangers posed by climate change. Continuing to ignore the risk will only make the price higher in coming years.