Flood insurance legislation relieves Beaufort County homeowners, but only temporarily

dburley@islandpacket.comMarch 22, 2014 

A new federal law is expected to temper skyrocketing flood insurance premiums that have burdened Beaufort County homeowners and hurt the real estate market, area insurance agents and Realtors say.

The law, signed Friday by President Barack Obama, eases rising rates for those in older homes or ones whose ownership has changed. It also caps how much rates can increase and offers refunds to those who have been hit hardest by a 2012 plan to rapidly phase out flood insurance subsidies.

"I think it's a positive thing for our area, for now," said Jean Beck, executive vice president of the Hilton Head Area Association of Realtors. "It certainly eases the tension."

But those involved also are concerned the relief might not come immediately or at all. For second-home owners and businesses, the law provides no reprieve.

Others say it will only postpone the inevitable; rising rates are the new normal for those living in flood zones.

"This just makes it a longer gliding path," said Lisa Jones, a flood insurance consumer advocate who owns Columbia-based Carolina Flood Solutions. "Instead of climbing to 30,000 feet in five years, you'll just get there in a longer time."

Lawmakers from both parties supported the measure in response to angry homeowners who faced sharp premium hikes after an overhaul of the government's flood insurance program two years ago. The 2012 rewrite was aimed at weaning those in flood-prone areas off of subsidized rates and required extensive updating of the flood maps used to set premiums.

However, when the law took effect Oct. 1, many homeowners along the Atlantic and Gulf coasts and in flood plains discovered that they faced unaffordable rate increases.

The new law stipulates that no individual policyholder pay an increase of more than 18 percent per year. It calls on the Federal Emergency Management Agency to "strive" that most policyholders have a premium of no more than 1 percent of the value of their coverage -- for example, $2,000 for a $200,000 policy.

The law also reinstates the federal insurance program's grandfathering provision, meaning homes that complied with previous flood maps would not be hit with large increases when new maps show greater risk of flooding. This helps older homes on Hilton Head Island, where 800 houses were built before the first maps were issued in 1976, according to town flood plain manager Richard Spruce.

Even more important to the area housing market, the law ends a provision that required an immediate hike to full-risk levels when a home changes ownership. New owners will now pay the same rates as the previous owners, with an 18 percent annual increase.

Many agents say deals were lost or put on hold when buyers discovered how much flood insurance would cost. In some cases, annual premiums would climb thousands of dollars for a new homeowner who renewed the policy and lost the subsidized rate.

"It caused some friction in the market because, for the most part, it's not feasible to have that as the cost of operation for your house," Beck said.

Potential buyers of some low- to medium-priced homes found the provision made their flood insurance premium too much consider buying, according to Beaufort-based real estate agent Edward Dukes.

"It could really be a deal breaker," he said.

The new law also provides a refund in premiums for those clobbered by the dramatic increases.

But Jones, the consumer advocate, said it's unclear when these premiums will come -- it could be 8 to 14 months before federal agencies and insurance companies get information up to date, she said.

"People need to understand this isn't immediate," she said.

Nor is the law all-encompassing. Businesses and second-home owners aren't exempt from the fee increases, and will still see 25 percent increases a year in premiums until they pay the full-risk rate.

On places such as Hilton Head, where nearly 50 percent of properties are not owner-occupied, this looms large.

Still, the law provides relief, Dukes said.

Rates will rise -- but that could be the new cost of doing business, he said.

"I think the new normal for buyers is to worry about (flood) elevation, and that wasn't the case before."

Follow reporter Dan Burley on Twitter at twitter.com/IPBG_Dan.

Related content:

Rising flood rates could increase renovation, demolition in Beaufort County, Feb. 23, 2014

Flood-insurance rates skyrocket for some in Beaufort County, Oct. 12, 2013

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