A national flood-insurance rate hike that took effect Oct. 1 is hitting some Beaufort County property owners hard and worrying local real estate agents.
Some who recently purchased property are seeing their rates increase tenfold, while rates for second homes or rental units are climbing 25 percent a year, with more raises to come. Local real estate agents say they've lost some deals after prospective buyers realized the cost of insurance, which can run more than $10,000 a year.
"There is definitely a shakeup in the industry," said John Alagna, who owns Hilton Head-based Carolina Heritage Insurance. "This will impact a lot of people in the area."
The rate increase stems from the Biggert-Waters Flood Insurance Reform Act of 2012. The measure was passed overwhelmingly by Congress to keep the National Flood Insurance Program solvent after a barrage of claims from catastrophes such as hurricanes Katrina and Irene.
Key to the act is getting rid of subsidized flood-insurance rates, in some cases gradually and in others cases -- as with the sale of a home -- all at once.
More than 7,000 of Beaufort County's 93,000 properties with flood policies have subsidized rates, the second-most in the state, according to the Federal Emergency Management Agency. Charleston County has the most.
For subsidized properties, certain elements determine the rate increase. A home's elevation relative to sea level, the year it was built and the amount of vent space, for example, can alter the rate, said Alagna.
"There are so many aspects where a premium might go up by a lot or a little," he said. "It's a case-by-case basis. But people need to find out, because the last thing you want is to be surprised by an insurance quote with no way out of a contract."
Julia Richards has owned a villa in Sea Pines for 11 years.
When she pondered changing insurance policies a few months back, she found her Lawton Drive condo, built in 1973, would cost more than $7,000 in annual payments to insure -- a far cry from the $700 or so subsidized rate she was used to paying.
Although Richards decided to keep her current policy, "if I stay here for the next 10 or 14 years, I'll pay more in flood insurance than the property is worth," she said.
For new owners or those whose policy lapses, the new law provides no subsidies, according to FEMA.
That worries some area Realtors, especially those selling older homes in low-lying communities like Sea Pines and Palmetto Dunes, where the higher rates might hit new homeowners harder.
"This is going to scare the bejesus out of people," said Andy Klepchick, broker-in-charge at Lighthouse Realty on Hilton Head. "It's frightening."
Many lenders require flood insurance if a home is in a flood plain. The only way potential new owners of a home in a flood plain can escape the expense is to pay for a house with cash and risk going without insurance, FEMA's website says.
"If you don't buy in cash, you might be out of luck," Klepchick said.
For secondary homeowners, rentals or businesses, the new law increases rates by 25 percent each year until their premiums reflect true market risk, said Dick Patrick of the Hilton Head-based Patrick and Taylor Real Estate Team.
Patrick represented South Carolina this week at the National Association of Realtors conference, which tackled the issue.
"I found out we're lucky here on Hilton Head," he said. "The biggest impact is on the older homes, in places like South Florida and Louisiana."
Senators from those states are pushing to delay the law's implementation. And the state of Mississippi has filed a lawsuit against FEMA, The Associated Press reports.
"It seems like it's going to take congressional action, and what do you think the chances of that are?" Patrick said.
Besides a few lost deals, he said he doesn't think the law has dampened the real estate market yet.
But he did say things could get much worse in the next few years, when secondary-home rates are fully realized.
Richards, of Sea Pines, agrees.
"My problem is going to be if I want to sell," she said. "I think eventually people will just have to walk away."
Presentation: Flood insurance policy numbers in coastal SC
HOW TO GET AN ELEVATION CERTIFICATE
Elevation certificates ensure your flood-insurance premium accurately reflects your risk. With new flood-insurance rates taking effect across Beaufort County, an updated certificate could mean the difference between a lower or higher annual premium.
Here's how to get your certificate:
- Contact Beaufort County flood plain manager Hakim Bayyoud and ask if your property's elevation information is on file. If so, he is authorized to complete the certificate for you.
- If your information is not on file, you might need to hire a licensed surveyor to obtain an elevation certificate.
- When you receive a certificate, give one copy to your insurance agent and keep a copy for your records.
Follow reporter Dan Burley on Twitter at twitter.com/IPBG_Dan.