Some Beaufort County coastal property owners who rely on federal subsidies to lower flood insurance rates could see sticker shock in the near future.
That’s because the subsidies are expected to be phased out after a federal law expires next year, insurance agents say.
More than 6,500 properties in Beaufort County rely on subsidized insurance rates, with most located on Hilton Head Island, Federal Emergency Management Agency data shows.
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But no one knows exactly when the subsidies will end and be replaced with risk-based rates that reflect the true cost of living in a flood zone. The precise number of property owners whose rates would increase also is unknown.
To curb rising rates, coastal property owners are taking steps to better protect their buildings, including raising the structures higher off the ground.
“The subsidies are a reality,” state Sen. Tom Davis, R-Beaufort, said. “A lot of people rely on that reality when purchasing property on the coast.”
Davis authored legislation to reduce homeowners’ premiums and said he is pre-filing a bill Dec. 13 to expand the state’s Safe Home program, which provides tax credits to weatherized homes.
“We’ve got to put tools in the hands of homeowners to absorb the hit that’s coming” because the consensus in Washington is that the subsidies must eventually go, he said.
Federal lawmakers decided to hold off until new maps are re-drawn, which may slightly reduce premiums, though the savings will likely be offset once subsidies are eliminated.
Congress’ decision dialed down the controversial Biggert-Waters Flood Insurance Reform Act of 2012, which phased out grandfathered rates. The legislation wreaked havoc on some homeowners whose insurance premiums jumped two to three times the subsidized rate.
Following outcry from real estate agents, homeowners and legislators in coastal states, another law, the Grimm-Waters Act, overhauled the Biggert-Waters to ease rising rates for those in older homes or whose ownership has changed. It also capped how much rates can increase per year.
Phasing out subsidies could provide the private sector an opening to offer flood insurance. That’s what S.C. Department of Insurance Commissioner Ray Farmer is hoping will happen.
“Right now the only game in town is the (National Flood Insurance Program,)” Farmer told The Island Packet and The Beaufort Gazette. “It’s a program that’s $24 billion in the red. Our citizens have born the brunt of that. The best arbiter of rates in any state is competition.”
Protecting your home
In the wake of Hurricane Matthew, Chris Yates, Hilton Head Island’s floodplain manager, said he is fielding calls from homeowners asking what can be done to prevent flooding from happening again.
He said he also visited six flooded properties, two of which did not have flood insurance.
“Matthew has awakened a realization that flood insurance is a policy that does have value,” said Andy Corriveau, an insurance agent for State Farm. “(This area) went so long without a flood event. (Many) previously bought it only because they had to.”
Insurance agents suggest filling in a basement or installing flood vents in the crawl space to reduce the chance that the foundation of a building is displaced during a flood. Raising heating and cooling systems, water heaters, the electrical panel, and other mechanical items is another way to avoid flood damage.
Home elevation has also become popular in areas flooded by major storms, including Louisiana after Katrina and New Jersey after Sandy.
While lifting a home hasn’t quite caught on in South Carolina, Marc Creamer opened Hilton Head-based Atlas Lifting and Demo two years ago in the anticipation that it eventually would make its way to the Palmetto State.
Since the historic flooding of 2015, it’s been gaining ground in the Columbia area, he said.
“Most definitely it will soon be here (in Beaufort County),” Creamer predicted when interviewed before Hurricane Matthew. “Probably about two to three years before it takes off.”
Hurricane Matthew has expedited his timeline. At least five area homeowners have requested a lift, Creamer said recently.
If a home sustained damage exceeding more than half of its value, repairs must be brought up to code, according to FEMA policy.
Raising a 3,000-square-foot home — not including the expense of disconnecting and reconnecting the home to the property — is about $35,000, he said.
It’s a hefty initial cost , but it can be offset by reduced flood insurance premiums in as little as five to seven years, said Corriveau, the State Farm agent.
Reduced insurance rates aren’t the only advantage to home lifting.
The move can also make a house more marketable when selling, said John Robinson, a Dunes Real Estate agent and former board president of the Hilton Head Area Association of Realtors.
He said most of his buyers prefer newer homes that are up to building standards.
“It’s like when you go to the grocery store,” he said. “You buy the old bananas, you know what you’re getting into. They’re not going to last much longer.”