Flood insuranceRising sea level-induced floods cause increase in flood insurance rates
Long-term sea level rise has made tidal flooding a near-daily event in many cities, compared to 1950 when it occurred about once every two years. As sea level rises, threatening more homes along flood zones, flood insurance claims are expected to increase. The Homeowner Flood Insurance Affordability Act of 2014 (HFIAA), which went into effect on 1 April, means that primary homeowners would see an average 10 percent increase in flood insurance premium yearly, along with an extra $25 annual surcharge. Secondary owners of vacation houses and condominiums can expect about an 18 percent rate increase, plus a $250 annual surcharge.
Prior to legislation favoring increased flood insurance premiums, the National Flood Insurance Program (NFIP), managed by the Federal Emergency Management Agency (FEMA) subsidized flood insurance for more than a million Americans with houses in flood zones. The NFIP reached $24 billion in debt because low revenue from the subsidized premiums could not cover the payouts from hurricanes Katrina and Sandy claims. A 2014 Government Accountability Office report said FEMA’s debt to the U.S. Treasury is so large that the agency can only afford to pay on its interest. In 2013 the NFIP collected roughly $4 billion in premiums, while insuring property worth $1.5 trillion.
The Tampa Bay Times reports that paying flood insurance claims to the victims of hurricanes Katrina and Sandy was so overwhelming that Congress passed the Biggert-Waters Act of 2012 to increase flood-insurance premiums by 25 percent for people living in flood zones. The measure set off a panic in the real estate market with potential buyers delaying home purchases because in many cases, insurance premiums would now be higher than mortgages. Deborah Baisden, president of the Virginia Association of Realtors in Richmond, said 1,300 real estate transactions a day were delayed when Biggert-Waters went into effect.
After growing concerns and complaints, Congress passed the Homeowner Flood Insurance Affordability Act of 2014 (HFIAA) that revised the 25 percent increase. The act, which went into effect yesterday, means primary homeowners would see an average 10 percent increase in flood insurance premium yearly, along with an extra $25 annual surcharge. Secondary owners of vacation houses and condominiums can expect about an 18 percent rate increase, plus a $250 annual surcharge. TheWashington Post notes that homeowners can lower their insurance premiums with upgrades to their houses such as stilts and brick elevations that make them less vulnerable to flooding.
A 2014 National Oceanic and Atmospheric Administration study said long-term sea level rise has made tidal flooding a near-daily event in many cities, compared to 1950 when it occurred about once every two years. As sea level rises, threatening more homes along flood zones, flood insurance claims are expected to increase. Many conservation groups support HFIAA, hoping it will also discourage people from building homes in flood prone areas.
“In general, it’s a move in the right direction,” said Eli Lehrer, president of the R Street Institute; but he said that more could be done to fix the flood insurance program. Discounted insurance is “expensive for taxpayers and encourages people to live in harm’s way,” Lehrer said. “Stupid, rich people who want to should be allowed to build wherever they want to as long as taxpayers don’t have to bail them out.”
