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New federal legislation would stall flood insurance hikes

New federal legislation being filed Tuesday would stall dramatic increases in federal flood insurance rates expected to impact tens of thousands of homeowners in the Tampa Bay area with properties in low-lying areas.

The proposal, crafted by a bipartisan group of senators and representatives, would freeze rates for approximately four years while the Federal Emergency Management Agency conducts an affordability study of the government’s National Flood Insurance Program.

Homeowners across the country have been receiving notices of steep rate hikes — 10 to 20 percent, in most cases, on primary residences; 25 percent for second homes, commercial properties or those that have experienced repeated flood losses. The changes kicked in Oct. 1 under the Biggert-Waters Flood Insurance Reform Act, passed last year, that phases out subsidies that have kept rates low for insurance on older homes built before flood maps were redrawn to make them accurately reflect financial risk.

Homebuyers would face the biggest increases, as premiums for new policies are expected to run between $6,000 and $20,000 per year.

The increases have sent a chill through Tampa Bay area communities, especially those along the Pinellas County coastline or even in low-lying parts of Hillsborough County inland, as elected officials and Realtors have worried the dramatic spikes would make it impossible for some people to stay in or sell their homes or that property values will nosedive.

Especially considering the changes took many people by surprise, even a delay would be welcome to many in effected communities.

“That would be a blessing, needless to say,” said St. Pete Beach Mayor Steve McFarlin

“We’ve been hit on every angle.”

The federal government subsidized flood insurance policies for those living in vulnerable areas for more than 40 years, but payouts following severe storms in recent years, including hurricanes Katrina and Sandy, left the national flood program with a deficit of more than $24 billion.

Backers of the measure being introduced say they hope the federal government can come up with rates that are affordable, yet capable of making the federal flood insurance program solvent.

FEMA also would have to redraw its flood maps under the new law and reimburse those who had to pay more because of an incorrectly drawn map. If the measure passes, rate increases will be rolled back, though it’s unclear whether those who have already paid an increase would be reimbursed. After about four years, the insurance rates could again increase, but in a way lawmakers hope will be more gradual.

Real estate agents hope the reform will reverse fears that have spread through the market.

“It’s nice to know that a good chunk of my business is not going away,” said Steve Schmalhorst a real estate associate at Coldwell Banker in flood-prone South Tampa. “If [the law] does change ... that will at least keep the current market going in the path that its going, which is fairly good increases.”

On the other hand, though, knowing that a property was slated for an increase and may get one in the future could hurt some sales.

“The problem needed to be addressed, but the way they did it was wrong,” said Craig Beggins, President at Century 21/Beggins Enterprises in Apollo Beach.

Even if rates are rolled back, Beggins said he will still have to tell potential buyers that they may have to pay much higher flood insurance rates in the future, depending on how Congress handles the FEMA study.

“The cat’s out of the bag,” he said. “I think those houses are going to be affected.”

U,S. Rep. Maxine Waters, D-Calif., for whom the original flood insurance reform bill was named, orchestrated the talks that resulted in the bill being filed today.

“Over the past several months, I have felt the harm and heartache that many Americans have already experienced as a result of changes to the National Flood Insurance Program,” Waters said in a written statement. “From the start, I have made clear that I would lead the effort to fix the unintended consequences of the Biggert-Waters Flood Insurance Reform Act.”

The bill has a host of co-sponsors from Gulf Coast states, including Tampa Democratic U.S. Rep. Kathy Castor. Several other bills aiming to roll back the rate hikes have also been filed on Capitol Hill, including one from U.S. Sen. Bill Nelson.

Nationwide, only 20 percent of flood policies will experience a rate hike, but the Tampa Bay area will be hit especially hard. Hillsborough County has about 23,000 properties that will be impacted, while Pinellas County has more than 50,000 — the most of any county in the United States.

Some say that keeping flood insurance rates artificially low, in effect, downplays the risk associated with coastal development.

“There’s definitely a piece of this that Congress needs to add with regard to affordability for low-income and fixed-income homeowners,” said Rachel Cleetus, a senior climate economist with environmental nonprofit Union of Concerned Scientists. “What’s happening is that people aren’t aware of their true flood risk. More people and property are being put in harm’s way.”

“The underlying risk, in the long-term, is coming from sea level rise. ... That’s not something that Congress can legislate away.”

Many St. Pete Beach residents are retirees who bought their homes as an investment and will not see a return if they try to sell because of the flood insurance hikes, McFarlin said.

“A lot of our retirees don’t realize that if this thing stays intact and they were going to sell in a year or two they were going to be impacted tremendously,” he said. “These people have held on to a lot of waterfront properties — one, as their home, and, two, as an investment. They don’t get a second turn.”

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