In recent years the wave of devastating hurricanes and overflowing rivers has sent flood insurance premium skyrocketing, blindsiding homeowners and well as small business owners.
The National Association of Realtors (NAR) has told Congress is must act quickly to reduce excessive flood insurance costs and the uncertainty and disruption to the marketplace they bring.
“Despite everything that’s been done on this issue, the threat of a $30,000 flood insurance premium still looms,” said NAR’s David McKey, who testified before the Senate Small Business and Entrepreneurship Committee. “A few years ago, the uncertainty over future rate increases was enough for buyers to direct Realtors not to show them any listings in the floodplain. That’s enough to worry business owners and homeowners alike, and it’s something that needs to be addressed.”
McKey says the “Homeowner Flood Insurance Affordability Act,” which became law in 2014, has helped to rein in the most inaccurate rate increases across the country. Prior to that legislation, thousands of small business owners faced immediate and excessive rate increases under FEMA’s implementation of the “Biggert Waters Flood Insurance Reform Act of 2012.”
But McKey told the committee that there are still plenty of other concerns. He noted that even now, rates continue to rise by 25% each year until policyholders reach their “full-cost rate.” He estimates there may be as many as one million properties in the U.S. that currently have subsidized flood insurance rates. Those property owners, he says, face significant rate hikes in the future unless Congress acts.
McKey proposed a range of NAR-supported proposals he says could help. They include:
- Reauthorizing the National Flood Insurance Program, which sunsets in October 2017
- Using advanced technology to improve the accuracy of flood maps to provide the data needed to determine how many face unaffordable rates and also reduce the number of property owners who have to file expensive appeals; and
- Fostering a private insurance market to complement the National Flood Insurance Program
McKey also suggests a strategy for actually preventing flood damage. By authorizing the use of funds to proactively mitigate properties located in hazard areas, he said it’s possible to protect property owners while saving taxpayers’ money. This might include flood proofing, elevating, or otherwise strengthening a property.