2013-03-21 / Front Page
FEMA: New flood insurance rates could hurt homeowners
Mitigation grant funding will go to buyouts first, says NFIP expert
Beginning this year, changes to federal flood insurance legislation could lead to “painful” cost increases for some area homeowners, according to one Federal Emergency Management Agency (FEMA) official.
Robert Durrin, a FEMA National Flood Insurance Program (NFIP) specialist, told more than 150 professionals, activists and volunteers involved in the recovery effort on March 6 that local governments and residents need to protect their properties now, before the costly changes go into effect.
“The NFIP is transitioning from a heavily subsidized program by the government to a nonsubsidized program,” Durrin said, referring to current government discounts on certain NFIP policies. “So my message to local government and building inspectors and building departments is, you’ve got to do your job.”
“Local government has the authority, and they really need to step up and make sure [rebuilding] gets done right. Things need to be done now,” Durrin added.
Due to a number of multibillion-dollar disasters, the NFIP has faced financial trouble for years. According to a report released last month by the Congressional Resource Service, NFIP payouts for Sandy-related damage are expected to top $12 billion. In 2005, Hurricane Katrina cost the program close to $18 billion.
To help balance the program’s budget, Congress enacted the Biggert-Waters Flood Insurance Reform Act in July 2012. The law, according to the FEMA website, calls for the NFIP to “eliminate flood insurance subsidies and discounts, and to increase rates to reflect actual flood risk” in the coming years.
“It’s tough love, but it has to be done,” Durrin said.
Beginning on Jan. 1 and continuing throughout 2013, certain second-homes and structures built before the enacting of current Flood Insurance Rate Maps (FIRM) will lose discounts, subsidies and grandfather clauses on their flood policies, leading to rate increases of up to 25 percent per year.
Later this year, some businesses and properties that have suffered severe repetitive losses will lose their federal subsidies as well. All remaining flood-zone structures will follow in 2014, Durrin said.
“I expect we will hear some noise from property owners. It’s going to be a noticeable increase in the cost of flood insurance ... very noticeable,” he said, speaking at the Monmouth County Long-Term Recovery Group meeting at county library headquarters in Manalapan on March 6.
In addition to the move toward “actuarial,” or unsubsidized, insurance policies, Durrin and others said changes to base flood elevations and other mitigation requirements could lead to costly increases as well, especially if property owners and local officials don’t follow them to the letter.
“The talk I’m hearing is five figures in some cases for flood insurance,” he said, referring to annual premiums of more than $10,000 in some high-risk flood zones.
“Biggert-Watters is going to more than likely cause some pain for people. And they are going to want to know why. Between what all you people do, what we do, what local communities do, we’ve got to get these buildings put back right.”
Currently, flood insurance rates are tied to existing FIRMs, which have been in place for years and were actually being updated prior to Sandy. While FEMA has released Advisory Base Flood Elevations (ABFEs) to help guide towns and homeowners in the rebuilding process, base insurance premiums won’t be affected until the agency releases its new, preliminary FIRMs late this summer.
Residents who wish to protest their flood zoning — which officially determines, for example, how high a home must be elevated and the level of risk a flood policy carries — should wait until the preliminary maps come out to do so, FEMA representative Virginia Hale said
“That’s when you can argue [that] you don’t like what zone you’re in,” she said at the meeting. “That’s when you can fight it.”
According to Durrin, communities will have 90 days following the release of the preliminary maps to appeal. While the agency will listen to personal or anecdotal testimony, Durrin said the process is primarily for registering empirical, professional testimony regarding mapping errors, modeling adjustments and other issues.
“The key is ‘scientific’ or ‘technical.’ We don’t need to hear from people that [say], ‘I’ve lived here for 50 years and never seen a flood,’” he said. “We’ve already done that. We don’t need to hear that again.”
Once all appeals are resolved, towns will have a six-month “compliance period” to incorporate the finalized maps into their floodplain management programs. Those maps will be the official drivers of flood insurance premiums for the foreseeable future. The ABFEs currently being used to project mitigation and construction requirements throughout the state should be “pretty close” to the finalized FIRMs, Durrin said.
“They have been produced pretty conservatively. What you see is probably more than what you will get, ultimately.”
Some programs or funding options to lessen the burden on area property owners are being made available, Durrin added, including the federal Hazard Mitigation Grant Program (HMGP).
Overseen by FEMA, the HMGP establishes a pot of money equaling 15 percent of the total cost of the storm, which is then doled out to the affected states for flood control projects and other work, according to Durrin.
Unfortunately, he said, the program only allocates $10 to complete $100 worth of work, which means certain projects, such as focused buyouts, will be prioritized over others.
“The biggest bang for the buck is to tear the building down and move it out,” he said. “Then the property is vacant. We’ve got no problem anymore. Demolition, get it out of there — that’s the highest priority.”
Other work, such as raising a home or installing flood-control devices, may be funded by the program as well, but will have a lower priority for state approval than “project-oriented” mitigation tactics, Durrin said, which decrease the flood risk for multiple properties at once.
All HMGP projects are voluntary and must be applied for by the affected homeowner.
“The property owner’s primary responsibility is to let your community know that you are interested in being part of a project and let the chips fall where they may from there,” he said, adding that HMGP funds will likely not “hit the street” for close to two years.