Two months after Hurricane Sandy sent more than a foot of water into Marie and Duff McQueen’s Ventnor Heights home, the couple made the hard, expensive decision to elevate the house.
They had been told that unless they lifted their two-story house, built in the 1920s, their flood insurance bill would increase from $1,800 a year to about $10,000 a year.
“We wouldn’t have been able to afford to live here,” Marie Mueen said. “We just figured if we love where we live and want to live here, that’s what we had to do.”
Perhaps the most frustrating worry for Jersey Shore homeowners as they recover from Sandy is the crushing increase in flood insurance premiums. No one knows just how much those increases will be or when they will come.
The rate increases are coming for myriad reasons; many were developing even before Sandy struck. They include a full revision of flood insurance rate maps that began in 2009, as well as an overhaul of the federal flood insurance program to eliminate nearly all subsidies and require policyholders to pay rates that reflect the true insurance risk.
State and congressional politicians, including Gov. Chris Christie, a Republican running for re-election in November, warn that rates will be virtually unaffordable unless homeowners do all they can to protect their property from future damage. Some congressional lawmakers — including many who voted for the rate increases last summer — now are working to soften the blow.
Those politicians say that while rate increases made sense before Sandy, the financial punch of paying to repair the storm’s damage, coupled with dramatic insurance increases, is too much for shore residents to absorb.
“In light of the unprecedented circumstances faced by tens of thousands of people attempting to rebuild from the ravages of Sandy, foisting the additional burden of a flood insurance rate increase on home and business owners as currently proposed would be financially devastating,” Christie wrote in a May 10 letter to leaders of Congress.
N.J.’s flood claims
For the past 45 years, flood insurance rates for many homes in coastal areas were based on several factors, including the building’s age, foundation type and the amount of coverage. Homeowners could also receive discounts if their communities adopted strict flood standards that included zoning rules and design standards.
For houses built after federal flood insurance rate maps were approved, usually after 1982, the rate also factored in how high or low a building’s main level was compared to what Federal Emergency Management Agency maps projected would be flood levels during a major storm. If a house was built above this “base flood elevation,” the homeowner’s risk was lower and that person paid less.
However, the federal government kept insurance rates low through rate subsidies for houses built before maps were approved — usually pre-1982. Many of those houses were built close to the ground and were more likely to be damaged by flooding. Additionally, the rate maps dramatically underestimated the current and future flood risk properties face, flood policy experts say.
Because of this, most homeowners did not have a clue as to what the true flood risk was to their house, said Larry Larson, senior policy adviser for the Association of State Floodplain Managers.
New Jersey ranks fourth in the nation in the number of flood insurance policyholders.
Sandy’s flood claims brought New Jersey up to third in the nation for the total value of policy payouts since 1978 — behind only Louisiana and Texas, FEMA records show.
Repeated losses — an indication that houses are not built high enough — in New Jersey rank fourth nationally, FEMA records show. The value of property that is at risk of suffering flooding in New Jersey is more than $55 billion — fourth in the nation again, according to FEMA.
Overall flood losses since 1978 have totaled more than $433 million in Toms River, $153 million in Ocean City, $146 million in Little Egg Harbor Township and $96 million in Atlantic City, FEMA records show.
Nationally, more than $48 billion has been paid out in flood claims since 1978, and disasters since 2005 have racked up a record $24 billion deficit in the flood insurance program, FEMA records show.
After Hurricanes Katrina, Rita and Wilma caused record financial losses to the flood insurance program in 2005, congressional leaders began working on legislation to reduce the deficit. The Biggert-Waters Act was signed into law in July, after receiving overwhelming support in Congress, with 373 members of the House and 74 senators voting for the bill.
“We were on the edge of there being no National Flood Insurance Program. I do not know how that is not as severe a situation as you can face,” said U.S. Rep. Frank LoBiondo, R-2nd, who was among the bill’s supporters. “People who were against this were people who want no flood insurance program.”
About 20 percent of flood insurance policies are subsidized, according to FEMA. As a result of Biggert-Waters, many of those policies will see a 25 percent rate increase per year until the rate reflects the true risk — tens of thousands of dollars a year for some houses that were built before flood standards were put in place.
Under the act, rates for primary residences still will be subsidized until the house is sold or ownership is transferred. This could have a lasting impact on real estate prices in some communities, as any home sold under those conditions could fetch a much lower price, flood policy experts said. But rates will rise by 25 percent per year for subsidized policies on second homes, as well as properties that have been flooded repeatedly and business properties.
“The rates reflect true risk,” Larson said. “For 45 years, these people got a subsidy and we have never told them what their true risk is.”
As the outcry over rising flood insurance rates grows, so, too, does political response in New Jersey and Washington. Many residents are hoping legislation passes soon to either lessen the impact or remove it altogether.
Although efforts are getting bipartisan support from legislators in flood-prone areas, it’s also encountering opposition, primarily from Republican legislators whose districts are not affected.
LoBiondo in April introduced legislation to soften the financial blow by reducing the rate of annual increases by half and extending the process to eight years instead of four. His bill has picked up a number of supporters, spokesman Jason Galanes said. But because of the failure of similar measures in the Senate, LoBiondo “is weighing legislative strategies” in how how he will proceed, Galanes said.
Late last month, U.S. Sen. Robert Menendez, D-N.J., introduced a bill similar to LoBiondo’s bill in the House. Menendez’ bill, which is co-sponsored by U.S. Sen. Frank Lautenberg, D-N.J., also would reduce the rate of the annual increase, but with modest increases for the first few years and the overall process taking 10 years, spokesman Paul Brubaker said.
While Congress was revamping how flood insurance rates would be set, FEMA has been working to revise outdated flood maps that determined which houses were in flood zones and how high those houses should be built to reduce damage risks.
When Sandy struck, the firm hired by FEMA to design the new maps had completed part of the job. In December, FEMA released that information as advisory maps — essentially drafts — to help homeowners decide how they could rebuild. The new proposed elevations were a shock to many residents and towns, and added 33,000 properties in New Jersey to flood zones.
When FEMA officials released the advisory maps, the elevation data included had been all but finalized due to the years of work already completed as part of the remapping effort. The advisory maps, however, did not have a wave analysis study, which determines whether a house is in a velocity zone.
Because their Ventnor Heights house is their primary residence, the McQueens’ flood insurance bill would not be increasing due to the Biggert-Waters Act.
However, their new base flood elevation under the advisory maps was 3 feet higher and, to protect from future floods and reduce flood insurance costs, the McQueens needed to raise their house by at least 6 feet.
The house now is 8 feet higher and towers over their neighbors, many of whom also are planning to elevate, Marie McQueen said. But most importantly, their insurance bill will be $420 a year for at least the next two years.
“You start to get used to the height once you’ve been in it a while,” said McQueen, who is living in a neighbor’s house until construction is complete. “We just can’t (go through a flood) again.”
Paying for risk
The Jersey Shore is likely to look a lot different in the coming years as houses are rebuilt several feet higher than they were before Sandy.
The tear-down culture of building is likely to continue, but the houses that replace older — and lower — bungalows and ranchers likely will be higher and, even though they will be far from the water, on piling.
That is the prediction of numerous policy and planning experts as they envision a future in which storm-proofed houses will be more valuable than proximity to the water.
“People are going to realize that, gee, if my house had been higher, I wouldn’t have gotten flooded,” said Mark Mauriello, flood policy expert and former commissioner of the state Department of Environmental Protection. “This is personal to them now.”
Fears of more frequent and intense storms due to climate change and sea-level rise are compounding the fact that the federal government may be less inclined in the future to dole out huge storm aid packages.
“I think people are starting to see this isn’t a once-in-a-blue-moon thing where taxpayers have to jump in and help rebuild,” Larson said. “Now they’re asking, ‘Who are these people, and why are they at risk?’ They’re realizing that everybody makes a choice where they live.”
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