Flood insurance is on the minds of many homeowners as we head deeper into hurricane season. A law that goes into effect next year ends flood insurance subsidies. FEMA, which runs the government’s flood insurance program is deeply in the red. The agency is updating 30-year-old maps to expand areas deemed at risk of flood damage -- and that’s striking fear in communities that could be deluged with higher insurance bills.
Swept away by premiums
It’s open mic night at Thai Rock bar and restaurant in Rockaway Beach Queens. The band is playing “Friend of the Devil.”The restaurant is on a pier. The deck is strung with lights, but the inside is walled off with plasterboard from Superstorm Sandy, seven months later.
“It was horrible,” recalls Robert Kaskal, owner of Thai Rock. “Our home was destroyed. We moved into my restaurant, which has an upper floor, but the whole downstairs of the restaurant was destroyed.”
The bartender shows off pictures on his phone of his bloody head after falling during the storm, and talks about the elderly neighbor who didn’t survive. But there’s more on people’s mind than renovations and close calls right now. It’s less tangible than the storm, and far more anodyne, but it’s much more certain to make land fall: new insurance rates -- very high ones.
“I’ve heard for a typical home, as much as $30,000 a year,” says Kaskal.
That’s the high end, says Thomas Herrington, a professor at Stevens Institute of Technology who has advised FEMA. But it’s completely possible. For every foot below flood level, insurance premiums rise by $7,000 to 10,000.
This is happening because FEMA is revising its flood maps, which indicate flood risk. For New York, the last ones were completed in 1983. As they become updated and refined, they are revealing many more people at risk of flooding during a hurricane. At the same time, a bill passed by Congress in 2012 known as the Biggert Waters Act would remove subsidies for flood insurance. A lot more people will need insurance, and that insurance could be a lot higher.
The map below is a draft that FEMA is sharing in advance of the upcoming release of the Flood Insurance Rate Maps (FIRMs), which will show both coastal and riverine flood hazards.
Kaskal fears his working class community will get swept away -- not by the seas, but by those premiums.
“The insurance is going to become so expensive that the only people who are gonna be able to live in properties like this are the wealthy,” he says. “Look around you, this is a very unique place -- beach front property and working class. We have tradesmen and artists.”
A legacy of Katrina
“We’ve long been undervaluing the true risk” of disasters, says Herrington. “For a long time the National Flood Insurance Program was solvent.” Then came Katrina.
“It devastated entire communities to the point where you had to rebuild completely. The cost was astronomical compared with the premiums paid in. That was the first time the NFIP had to borrow to pay off its homeowners,” Herrington says. It asked Congress for $16 billion.
That’s when FEMA decided it needed new maps. Then in July 2012, Congress passed the Biggert Waters Flood Insurance Reform Act that, among other things, removed subsidies for flood insurance and ended the grandfathering that had allowed older structures to escape design standards.
A few months later, Sandy hit. FEMA had to borrow another $10 billion from taxpayers.
Floating some rescue lines
FEMA is well aware that the changes could create hardships. Maryanne Tierney is deputy administrator for region II, which includes New York.
“It’s a tough situation for people now,” she says. “Their homes have been damaged, and in order to ensure in the future there’s not significant similar damage, there are things people are going to have to do to minimize the loss. Some of that’s going to be in increased cost of living in that area and that will be born through having to pay insurance or do things to your home to minimize damage.”
There is a patchwork of federal programs that can help people -- the Small Business Administration has disaster loans, FEMA gives money to states who have undergone disasters for making structures more resistant to future disasters, and there are grants for people who had flood insurance before but who now need to make design improvements for newer, more strenuous policies. But there are many people left out, and communities have to negotiate the best combination of programs.
In most cases, a home subject to higher flood insurance (and, via maps, at strong risk of damage in the event of a major storm) can reduce those rates by being elevated on pylons.
Seth Pinsky, president of the New York City Economic Development Corporation, says that’s not realistic for New York.
“The challenge that we have in a dense urban environment like New York is it’s simply infeasible,” he says, for about 40 percent of structures. “In many other cases it’s highly undesirable -- resulting in destruction of retail corridors or just highly expensive.” He’s pressing FEMA to allow easier ways to reduce premiums. He also wants a high deductible low premium policy available for homeowners.
“If you were flooded and you lost your washing machine, you wouldn’t get much. But if you lost your entire home you’d be protected," Pinsky says.
Politicians elsewhere are pushing to delay the higher premiums across the board. That has Steve Ellis, vice president of Taxpayers for Common Sense, worried that the political process might interfere with a desperately needed reality check for people living in flood prone areas.
“If we’re not pricing [flood insurance] appropriately, it serves as an incentive to develop and locate in high risk areas," he says. Which could leave taxpayers footing FEMA’s bill. “This is a program that is now $24 billion in the hole”
In the end, someone will pay for the next disaster. The question is who.