It’s $25 billion in debt, and it could have a big impact on Beaufort County property owners’ wallets

Congress’ struggle to shore up the debt-ridden National Flood Insurance Program could have a far-reaching impact on Beaufort County property owners and coastal real estate.

A short-term extension to NFIP was approved Sept. 8 by Congress, buying lawmakers three months to decide on a long-term solution for the program, which is $25 billion in the red.

Although Beaufort County’s new flood maps, expected to take effect sometime in 2019, might reduce flood insurance premiums for many residents, local floodplain officials say, the savings could be offset by a national push to raise rates that reflect the true risk of living in a coastal community.

“If they take the subsidies away, (the savings from the new maps) could be a wash depending on what they do in Congress,” said Rich Chiaviello, a broker with Lowcountry Services, which has offices in Bluffton and Beaufort.

At stake nationwide is the 1 million subsidized policies of the roughly 5 million total NFIP policies, said Larry Larson, director emeritus and senior policy adviser of the Association of State Floodplain Managers, a nationwide organization based in Madison, Wisconsin.

In Beaufort County, more than 6,500 properties rely on subsidized insurance rates, with most located on Hilton Head Island, FEMA data shows.

The estimated subsidized premium rate is between 35 and 45 percent of the full-risk premium rate, according to a 2013 U.S. Government Accountability Office study.

This summer, the U.S. House was considering a bill that would have shifted nearly $900 million away from the Federal Emergency Management Agency, which oversees the NFIP. President Donald Trump’s FEMA chief, Brock Long, supported reducing the federal government's role in flood relief and insurance. NFIP administrator Roy Wright expressed similar sentiments.

“The time has come to start limiting coverage for properties that are flooded over and over, a significant shift from the past,” Wright told The New York Times.

In the wake of expected claims to be filed from hurricanes Harvey and Irma, the urgency for a long-term solution is amplified. Lawmakers are divided, mostly geographically, on how much taxpayers should subsidize the risk of living in a flood zone.

What some, including Larson’s organization, are suggesting is that instead of covering a portion of insurance premium costs, the federal government should focus on “mitigation,” or offer incentives to homeowners who elevate their homes or relocate.

“The safer construction it is, the better it’s built, the less damage there is and the less taxpayers have to fund for relief,” Larson said in a recent interview with The Island Packet and The Beaufort Gazette.

U.S. Sen. Tim Scott, R-Charleston, filed a bill in June that would allow FEMA to impose penalties on flood-prone communities that do not invest in voluntary buyouts, drainage improvements or other forms of mitigation. FEMA identified four flood-prone communities in South Carolina: the city of Charleston, Horry County, the city of Mauldin and the city of North Myrtle Beach.

The bill is still under consideration in both the House and Senate, according a representative in Scott’s office.

U.S. Sen. Lindsay Graham’s press office did not respond to three emails for comment.

U.S. Rep. Mark Sanford, R-Charleston, said the key is to incentivize people to buy flood insurance.

“We’ve seen people walk as premiums rise,” he told the Packet and Gazette. “There isn’t an easy answer. Part of it is (building) code(s), which is done at the local level.”

Efforts are also being made in the S.C. Legislature to encourage home mitigation programs.

State Sen. Tom Davis, R-Beaufort, filed legislation last year to expand the state’s Safe Home program, which provides tax credits to homeowners who make their properties storm-resistant. Under his bill, the tax credits would be offered to those who also make their homes more flood-resistant. But his proposal went nowhere.

“It got caught behind the gas tax bill,” Davis recently told the Packet and Gazette.

But the bill had bipartisan support, and subcommittee hearings on the legislation will be held in January when the Legislature is back in session, he said.

“I don’t expect serious opposition to this bill,” Davis said. “It’s always good policy to encourage homeowners to mitigate.”

The political consensus against subsidies comes nearly five years after Congress passed the Biggert-Waters Flood Insurance Reform Act of 2012, which, among other things, phased out grandfathered insurance rates.

Outcry from real estate agents, homeowners and legislators in coastal states prompted Congress to pass another law, the Grimm-Waters Act, to ease rising insurance rates for those in older homes or whose ownership had changed. It also capped how much rates can increase per year, with some property owners’ premium increases taking up to 18 years to achieve full-risk level, Larson said.

The delay in rising rates pleased real estate agents across Beaufort County.

“Flood insurance rates are inching up a bit, but viewed by most buyers as fairly affordable,” said Dick Patrick of the Hilton Head-based Patrick and Taylor Real Estate Team.

And a flurry of recent storms — Matthew, Harvey, Irma and Maria — has caused homeowners to acknowledge the value of flood insurance.

“It’s on everyone’s mind,” Chiaviello said. “More people are buying today than 18 months ago.”

This story was originally published September 30, 2017 at 12:01 AM with the headline "It’s $25 billion in debt, and it could have a big impact on Beaufort County property owners’ wallets."