December 12, 2015 10:51 am
Over the past decade, storms like Hurricane Sandy have wreaked havoc on many parts of the country, causing insurance rates to go even higher, which is ultimately having a negative effect on home sales. According to data from the National Association of REALTORS®, from October 2013 to January 2014, over 40,000 home sales were either delayed or canceled because of increases and confusion over flood insurance rates.
This led to some swift action by President Barack Obama, who, following the release of these figures, said that homes in flood-prone areas would no longer be subject to sharp increases in flood insurance premiums when they’re sold, or when a new flood map places them in a higher-risk area.
On March 21, 2014, President Obama signed the Homeowner Flood Insurance Affordability Act of 2014 into law, which repeals and modifies certain provisions of the Biggert-Waters Flood Insurance Reform Act, which was enacted in 2012, and makes additional program changes to other aspects of the program not covered by the Act.
“The Homeowner Flood Insurance Affordability Act, S. 1926 is the time-out REALTORS® first advocated when dramatic flood insurance premium increases went into effect on October 1, 2013,” said Steve Brown, president of NAR in a statement at the time of the passage of the bill. “This legislation will help homeowners nationwide who are experiencing financial hardship as a result of extreme flood insurance rates that are the unintended consequence of the Biggert-Waters reforms to the National Flood Insurance Program.”
The new law caps flood insurance premium increases and allows below-market insurance rates to be passed on to people buying homes in flood zones with taxpayer-subsidized policies.
Still, it’s not good news for everyone. Those who live in older homes and enjoy subsidized flood insurance rates could still see annual increases in their premiums of up to 18 percent. Furthermore, homes in high-risk areas (labeled with codes starting with A or V on flood maps) will need to pay a new premium surcharge of either $25 or $250 per year to help offset the cost of the new bill. The surcharge applies to all properties that have national flood insurance, even those paying the full-risk rate.
Brown believes this is the first step in what he hopes is a retooling of the way Congress looks at the flood law, and expects it to help with home sales going forward.
FEMA classifies flood risk as something unique to each structure and looks at factors such as the elevation of the property relative to predicted flood levels, the construction style of the building, and the flood risk zone. It also publishes flood hazard maps that show predicted flood levels and flood risk zones based on historical climate information and the best available science. Some common examples of Special Flood Hazard Areas include coastal floodplains, floodplains along major rivers, and areas subject to flooding from ponding in low lying areas.
For more information about the Homeowner Flood Insurance Affordability Act of 2014, contact our office today.
Published with permission from RISMedia.