Flood Insurance Reforms Could Dry Up Home Sales
As rain pounds the Tampa Bay area, Florida realtors are worried that changes in the federal flood insurance rates - scheduled to kick in October 1st - will dry up home sales.
The flood insurance reforms, known as the Biggert-Waters Act, in part require all new home buyers pay full rate for flood policies ending any subsidy the previous home owner enjoyed.
State officials said that Floridians pay into the federal flood insurance program four times more than they've received in claims. But that 13 percent of all Florida policies are subsidized. The counties with the highest rate of subsidies: Monroe 37 percent; Pasco 36 percent; Pinellas 35 percent; Sarasota 28 percent; Hillsborough and Lee 21 percent.
Brandi Gabbard, chairman-elect of the Pinellas Suncoast Association of Realtors, told the Florida Cabinet Tuesday morning that home sale contracts are already being canceled and some owners may get priced out of their homes.
“Approximately one-third of all properties in our county will be affected in some way by the unintended consequences of the Biggert-Waters Act,” Gabbard said. “There are more homes affected in our county than in any other county in the country and nearly half of those affected are in St. Petersburg area alone.”
St. Petersburg Mayor Bill Foster told cabinet members that more than 15,000 homes in his city alone could be hit with unaffordable flood insurance premiums if the federal reforms aren’t delayed.
“We need you. We need the full weight of the State of Florida and this cabinet to encourage the 29 members from the Congressional delegation from the State of Florida to hit pause,” Foster asked.
There’s concern the real estate market will dry up if new home buyers policies don’t have phased in premiums and the subsidy is totally lost.
But there’s more to fear like the 25 percent annual premium increases current owners will face as subsidized rates are adjusted to become actuarially sound.
“My greatest fear … is that existing homeowners mortgage who have their flood insurance premiums escrow could face foreclosure as they’re unable to afford the increase in escrow required to cover the new flood insurance premium,” said Dean Asher, president of Florida Realtors.
Federal officials at FEMA said only Congress has the power to delay or stop implementation of the flood insurance reforms. The House reportedly took action and is waiting on the Senate.