More than one-third of New Jersey flood insurance policyholders, including many still recovering from Hurricane Sandy, will be affected by sweeping changes to the federal flood insurance program to take effect Tuesday.
While primary homeowner policies will not be affected immediately, policies for second homes, houses that have been repeatedly flooded and businesses will see sharp rate increases, potentially exceeding $10,000 per year.
The changes will affect flood insurance policyholders across the country, but policyholders in New Jersey will feel a disproportionate effect compared to the rest of the country, according to an analysis of Federal Emergency Management Agency data by The Press of Atlantic City.
And flood insurance policyholders in South Jersey appear to face the most effects from the coming changes, the analysis shows.
More than 1,600 primary homeowners in Atlantic City and more than 1,000 in Little Egg Harbor Township will be affected. Of the 10 towns in New Jersey with the most affected primary homeowners, seven are in South Jersey. Of the 10 towns with the most secondary homeowners affected, nine are in South Jersey.
Florida ranks first in the nation for the overall number of policies affected — 268,000, or 13 percent. New Jersey ranks second, and its 88,000 policies affected by the changes represent 37 percent of all flood insurance policies in the state, the analysis shows.
Of those 88,000 policies in New Jersey, 17,000 affected by the changes belong to second homeowners, while more than 42,000 belong to primary homeowners, according to FEMA data. Nearly 5,000 of the affected policies belong to businesses, and more than 22,000 are for apartment and condominium buildings, for which new flood insurance rate changes have yet to be determined.
New Jersey’s statistics illustrate the vast number of coastal homes and businesses that were built before flood insurance rate maps were adopted and, thus, are likely to have a much higher flood risk, because they were not designed to meet flood standards. Sandy brought New Jersey’s total flood losses since 1978 to $5.3 billion, third in the nation behind Louisiana and Texas.
All of these price increases are due to a sweeping bill, the Biggert-Waters Act, passed by Congress in June 2012. The bill requires that all flood insurance policyholders pay more into the deeply indebted system, with rates reflecting a property’s true flood risk.
Secondary homeowners already are receiving new bills with higher rates. Beginning Tuesday, businesses and primary homeowners of repeatedly flooded houses will start receiving new rates.
The increases affect only properties that have federally subsidized insurance rates, which are typically older homes or houses that have the highest level of flood risk. Nationally, 19 percent of all flood insurance policies will be affected.
However, as flood maps in New Jersey and elsewhere are updated in the coming years, some property owners will see an additional 20 percent increase per year for five years. This additional increase would occur if the new maps increase the recommended elevations or put houses in flood zones for the first time.
Most primary homeowners, according to FEMA, will not feel the effect of the changes from the act until they sell their houses or let their flood insurance policies lapse. If that occurs, the new insurance rate will reflect the full price of the flood risk, which in some cases for those houses lowest to the ground could be more than $10,000 per year.
This could have a profound effect on real estate values for lower- to moderate-priced houses, said Thomas Bracken, president of the New Jersey Chamber of Commerce.
“At the end of the day, we’re talking about decreasing the value of very valuable real estate, and that could have an enormous effect on the real estate of New Jersey,” he said.
Second homeowners, however, already are receiving their new insurance bills. In some cases, those increases are dramatic, and for the next three years, additional increases will be added.
Margarete Lynn, of Brigantine, saw her annual bill jump from $526 a year to $6,141. Lynn’s insurance agent told her the increase is because FEMA, after inspecting the property for her Sandy claim, considered an attached shed to be the house’s first floor. Now, the house is considered 3 feet below flood elevation.
Lynn and her husband maintain their residence in Philadelphia but live in Brigantine eight months out of the year. She can’t detach the shed, because it contains her utilities.
“I’ve been very, very upset about the whole thing,” Lynn said. “Between the taxes on the island, which (are) over $6,000, and $6,100 for flood insurance, I can’t pay almost $13,000 to live here.”
Despite the Biggert-Waters Act receiving broad bipartisan support when it was adopted in June 2012, a number of legislators are seeing the burden the act will create for some homeowners.
“Affordable flood insurance is needed to keep (the coastal) economic engine humming,” said U.S. Sen. Bob Menendez, D-N.J. “If flood insurance becomes unaffordable, then people will be forced from their homes, and that will create a downward spiral of housing values.”
Menendez is among several lawmakers who have proposed bills to help with the coming impact, with most proposals seeking to stretch out the increases so premiums will rise more slowly. There are other solutions, including a voucher system, tax credits or reinstating subsidies for some homeowners, Menendez said.
Earlier this year, U.S. Reps. Frank LoBiondo, R-2nd, and Jon Runyan, R-3rd, co-sponsored a bill to stretch out the increases. LoBiondo has petitioned for the bill to be heard in committee, but other crises Congress is managing — including the budget and a possible government shutdown — are taking precedence.
“I don’t think there’s anything that is imminent,” LoBiondo said, regarding a solution or a delay for the price increases.
“Most members (of Congress) for coastal districts have no idea what’s coming,” LoBiondo said. As owners receive high bills, the political climate may become more favorable for some sort of fix to be passed, LoBiondo said.
As federal lawmakers start seeing the effect the law will have on residents of flood zones, other groups are urging Congress to keep the act intact. The groups warn that the National Flood Insurance Program’s debt is too much of a financial risk for taxpayers.
Additionally, these groups warn, climate change and sea-level rise will continue to add to flood losses. Unless homeowners and communities work to reduce risks, taxpayers will foot the bill, they warn.
“These rate increases may be unpopular, but they are overdue and necessary,” said Rachel Cleetus, a senior climate economist with the Union of Concerned Scientists.
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