Flood insurance costs for tens of thousands of Florida homeowners are blowing up as subsidies expire under massive legislation passed by Congress last year with little debate or consideration of its cost to policy holders.

The increases — some began in January and others go into effect Oct. 1 — are considered so harmful that even the senator whose name is on the act is pleading for changes. She warns of rates that in some cases will be “more than a thousand times higher” than current costs.

INTERACTIVE: Are you affected and how much?

Florida has 268,646 property owners that will be affected by the Biggert-Waters Flood Insurance Act reforms — about 13 percent of all policy holders and by far the most of any other state.

In Palm Beach County, just 3 percent of policies, or 4,834 properties, will see rate increases from the act as they lose subsidies from the National Flood Insurance Program.

But other areas, particularly in Miami-Dade County and Florida’s west coast communities, will be more severely affected.

Thirty-five percent of Pinellas County policies will experience rate hikes. On popular Sanibel Island, 58 percent of policies will lose subsidies that can make or break real estate deals.

Concern that Florida’s housing recovery will cool because of the rate hikes has most recently caught the attention of Realtors statewide. Beginning Oct. 1, people who purchase a property that was formerly subsidized will have to pay the non-subsidized rate.

Sanibel insurance agent Chris Heidrick said a buyer recently backed out of a sale on a 900-square-foot home after learning the flood rate would go from $2,440 to $16,092 — a 559 percent increase.

“We don’t want widespread panic,” Heidrick said about the rate hikes. “There are homes where nothing will change, and there are homes where the impact will be catastrophic.”

Heidrick, who owns Heidrick & Co. Insurance, said it’s important to stress that not everyone is going to see annual double-digit increases from the subsidy loss.

Affected properties fit into narrow categories, such as older homes in high risk areas that existed before flood maps. Primary residences that are in the pre-flood map category and receive subsidies are shielded from the increases until sold to new buyers, a policy is allowed to lapse, or a new policy is purchased.

More than 114,000 subsidized policies statewide will keep their stipend for the time being while the Federal Emergency Management Agency develops guidelines for their removal.

There is also the opportunity to get an elevation certificate that will determine a home’s exact height above flood level and possibly save the policy owner money.

Proposals to delay the rate hikes are being proposed in Congress and many hope they will get attached to appropriations bills or resolutions that must get passed by the end of the fiscal year Sept. 30.

“It’s pretty serious,” said John Sebree, senior vice president of public policy for the Florida Realtors. “FEMA is saying 87 percent of Florida policy holders won’t be affected, but 2 percent — 50,500 policies — will see immediate 25 percent increases.”

That issue hit home for Palm Beach County Realtor Eric Sain on Wednesday when he showed a property in Palm Beach Gardens. The buyer’s insurance agent said the flood policy could climb between $3,000 and $20,000 higher than the current rate. Sain’s clients are paying about $300 for an elevation certificate they hope will put them at the low end of the estimate.

For buyers who need financing, a leap in insurance rates could make it more difficult to qualify for a mortgage. Most mortgages require buyers to have flood insurance if the home is in a high risk zone.

“I don’t know that it will impact a lot of affluent areas, because those are often cash deals,” said Sain, who is the government affairs chairman for the Realtors Association of the Palm Beaches. “Places where mortgages are more the norm, it could be cost prohibitive.”

The flood insurance reforms were approved in the summer of 2012 by a Congress eager to reduce the $20 billion debt of the national program caused largely by Hurricane Katrina in 2005. Last year’s Hurricane Sandy is estimated to have upped the debt to $25 billion, according to the Association of State Floodplain Managers.

Also at issue was an attempt to create a long-term plan that would end the stopgap measures that kept expiring.

But in the haste to reform, the financial impact on policy holders was “not addressed at all,” said Chad Berginnis, executive director of the Association of State Floodplain Managers. Although an affordability study was called for in the legislation, it was not conducted.

“Let’s face it, the legislation was focused like a laser on the debt of the program and cost to taxpayers,” Berginnis said. “The thing is, ultimately this needed to be done. Something had to change.”

The act is named for former U.S. Rep. Judy Biggert, R-Ill., and U.S. Rep. Maxine Waters, D-Calif., the ranking member of the House Financial Services Subcommittee on Insurance. Waters joined in writing a July letter to FEMA alerting to the potentially “devastating” financial impact of the act on homeowners.

Sen. Bill Nelson, D-Fla., voted in favor of the act, but is also supporting an initiative aimed at delaying the rate increases for at least a year. Republican Sen. Marco Rubio voted against the act. His office didn’t directly answer whether he supports a delay, but said he is working on solutions to sustain the program long term with affordable costs.

It wasn’t until late March that FEMA issued guidelines on the act — a life-changing event, according to Heidrick.

“I couldn’t believe what I was reading,” he said. “But FEMA officials confirmed all our worst fears.”

Rate amounts were released last month.

“This has all been pretty quiet. It’s kind of sneaking up on people,” said Paul Merski, executive vice president for congressional relations for the Independent Community Bankers of America.

While a minority of policy owners are going to see significant and immediate increases from the act, the redrawing of flood maps and pending increases on non-subsidized policies are also ahead.

FEMA updated the Palm Beach County’s flood maps for the first time in 30 years and released the preliminary versions in June. Large areas that once appeared relatively free of major flood concerns — including Wellington, Royal Palm Beach, Loxahatchee and The Acreage — are now in various levels of high-risk flood zones on the preliminary maps.

The maps were so disturbing that the county’s congressional delegation sent a letter to FEMA saying the proposed maps could harm the county’s real estate market and would have “far-reaching negative economic impacts” on the county’s tax base.

One section of the Biggert-Waters act ends a grandfathering clause that allowed homeowners to keep their current rate even if they are put into a higher-risk category. Instructions on how it will be eliminated are expected next year.

“This is all happening at once,” said Doug Wise, director of Palm Beach County’s building division. “It’s a really scary time for a lot of folks. The phones are starting to ring.”

Palm Beach Post Staff Writer Charles Elmore contributed to this story.

How homeowners are affected

  • Owners of second homes that pre-date the Flood Insurance Rate Map and receive subsidies for their rates will see increases of 25 percent per year.
  • Owners of primary homes that pre-date the Florida Insurance Rate Map and receive subsidies will keep those subsidies until the home changes hands, the policy lapses or a new policy is purchased.
  • Home buyers who purchase in a high risk flood zone will not receive a subsidy and will pay the higher rate from the outset.
  • Property owners who are not in a high risk flood zone and have voluntarily purchased flood insurance will see only the normal National Flood Insurance Program increases.
  • A grandfathering clause that allows property owners to keep their previous rates if flood map changes puts them in a higher risk zone is being phased out. No guidance has been issued for the phase out and likely won’t be issued until next year.


Where to get information

For more information on flood insurance reform, go to http://www.fema.gov/flood-insurance-reform-act-2012.

By Kimberly Miller