New flood insurance rates hamper housing market

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When FEMA's new flood insurance rate maps were unveiled this year, Josh Alexander exhaled a sigh of relief.

His house at 730 Hope St., was not in a flood zone. But his neighbor's was.

"I'm about six or seven feet higher up than he is," Mr. Alexander said, explaining the zoning difference between his house and that of his neighbors', the Margiottas. "We're on the edge of the map. If it changes, we're greatly affected."

On Oct. 1, measures of the 2012 Biggert-Waters Flood Insurance Reform Act went into effect. Through this legislation, the NFIP is required to raise rates to reflect true flood risk, make the program more financially stable, and change how FIRM updates impact policyholders. The changes mean premium rate increases for some—but not all—policyholders over time.

Noting the size of their home and their growing children, the Alexanders put their home on the market over the summer. While they've had several interested buyers pass through, the thought of purchasing a home near a flood zone has frightened several, he said.

"We do have one potential buyer who is having a site survey done to determine what the risk is," Mr. Alexander said. "We're not paying flood insurance now, but again, that could change."

His neighbor, Tony Margiotta, however, isn't that lucky. Mr. Margiotta bought his home 13 years ago. At that time, he was paying just under $1,000 a year for flood insurance. Now, his flood insurance bill tops $5,000 per year.

"No one knows what's going on," Mr. Margiotta said. "FEMA's broke and mismanaged, and we're footing the bill."

FEMA released its report last February, which consists of a flood insurance study report and a flood insurance rate map (FIRM). The report examines the town’s flood hazards, flood sources and information on flood protection measures. The map illustrates the flood hazards through flood risk zones.

Information from the entire report is used by the federal government to determine the floodplain development regulations that would apply in each zone, and who must buy flood insurance.

"Any new policies that are written, they no longer have the opportunity to get a grand-fathered rate anymore," said Michelle Burnett, Rhode Island floodplain coordinator. "(The NFIP) is writing policies based on actual elevation data."

The changes, while helpful to support the NFIP, have only hurt those trying to sell or buy homes, especially in Bristol.

"I had two buyers interested in a house," said Morgan Lowis, a real estate agent with Residential Properties in Barrington. "Once they found out the new rate that could possibly go into effect, they walked away from their interest in the house.

"People are finding that some of the rates are doubling."

Depending on which flood zone a structure is built, flood premiums are increasing between 6 and 19 percent.

"My million-dollar view turned into a million-dollar expense," said Mr. Margiotta, who's had his home on the market for over a year. The price is slowly dropping from $695,000 to $519,000.

There are 1,020 flood policies in Bristol County that are currently being subsidized by the federal government, Ms. Burnett said. Those homes were built before the first flood insurance rate map went into effect in 1968, and therefore never had to meet standards of code.

"If someone goes to sell a home now, the new buyer is required to get an elevation certificate and will not be able to get a pre-FIRM subsidized rate" Ms. Burnett said. "Anyone with a mortgage or a federal line of credit is required to get flood insurance."

Real estate agents are encouraging all their clients with waterfront property to get a flood elevation certificate, because an educated buyer is going to ask for one, Ms. Lowis said.

"Buyers are being very cautions in flood zones and fringe areas," said Jackie Cranwell, a Raveis Real Estate broker. "It's another cost to consider."

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