More than 268,000 property owners in Florida — including 71,747 in South Florida — face potential rate increases of hundreds or even thousands of dollars a year for flood-insurance premiums, mostly for low-lying homes and businesses along the waterfront.
Those with second homes in the lower parts of a flood zone or who live in frequently flooded places have been hit since January with premium increases of 25 percent a year. Starting in October, thousands more who have gotten relatively cheap premiums for years under the National Flood Insurance Program will face the same rate increases.
And premiums will continue to rise by 25 percent every year until they reach a point considered actuarially appropriate for the risk of floods in a state frequently battered by hurricanes, tropical storms and torrential rains.
“Agents are bringing in examples of properties on the coast that have been insured for $3,000, but the real at-risk rate is $12,000. And that’s just for the foundation,” said Jeff Grady, president of the Florida Association of Insurance Agents. “They say, `This can’t be right, can it?’ Well, afraid it is.”
Critics warn that the changes — which stem from a law passed by Congress last year with strong bipartisan support — may be enough to drive some people out of their homes and discourage real-estate sales.
But while some homeowners or buyers face a bigger bill for waterfront property, some people who live in relatively high and dry areas at the edges of flood plains will get lower rates for flood insurance. The reason: periodic updates of federal flood plain maps will show they live in low-risk areas.
The result is a confusing mix of winners and losers, producing sounds of alarm from some real estate and insurance agents, pushback from coastal communities, sighs of relief from those who may be spared and an attempt in Congress to delay parts of the law for at least a year to conduct an affordability study.
It also renews a heated debate about the wisdom of building close to the water in such places as South Florida, the Space Coast or even inland areas prone to flooding in Central Florida.
“As much as people complain about houses being built too close to the ocean, and close to water, it also gives value to properties in Florida. It’s what brings people to Florida in the first place,” said U.S. Rep. Joe Garcia, D-Miami, who is pushing for a delay.
“This rejiggering literally changes the equation of buying and selling homes in Florida,” he added. “At the top end of the scale, people can afford these things. But if you are a retiree, if you are a working person able to build up a nest egg and buy a house in one of these areas, this could put you out of your home. It could also affect your ability to sell your property, because it’s got this added price tag on it.”
Since the program was created in 1968, mortgage lenders have required federal flood coverage in areas designated by the government as the most vulnerable parts of flood plains. The Federal Emergency Management Agency estimates that premiums for 81 percent of current policies reflect the actual risk of flooding, but the rest have been “subsidized” by lower rates.
It has been a good deal for home and business owners for 45 years, but a steady loss for the government, requiring $24 billion in bailouts. Amid growing concerns about the federal deficit, Congress decided last year that the program should pay for itself, phasing out the subsidies by raising premiums at a rate of 25 percent a year to cover the actual risk.
Florida properties make up 37 percent of flood insurance policies nationwide. FEMA estimates that more than a quarter-million policies in Florida will be affected by the phaseout.
They include 47,362 policies in Miami-Dade County, 19,551 in Broward County and 4,834 in Palm Beach County.
Some think flood insurance is a good deal for most homeowners — even at higher rates.
“My flood insurance costs me $280 a year. The national average is $600. And I’m in a high-risk area in South Florida,” said Alexandra Horblitt, an insurance agent in Browar County. “There are canals all around me, the Everglades and the ocean. So with that in mind, even if I were paying double, it would still be a value to me because no other coverage provides the same as the FEMA flood insurance program.”
After hearing complaints from some agents and coastal residents around the country, the U.S. House in June passed a spending bill containing an amendment that would delay parts of the law for a year, notably a provision that gradually eliminates lower rates that were “grandfathered in” for homes built before the rules changed.
Federal officials shouldn’t move ahead until they know what the law would do to places like Florida, the Florida Association of Insurance Agents is telling Congress.
“There are pockets around the state where entire communities would go down, stores would close and people lose jobs,” warned Chris Heidrick, an insurance agent in Sanibel. “My concern — and the reason I think it should be delayed until an affordability study can be done — is that it wipes out an awful lot of property value.”