The Tribune Democrat, Johnstown, PA

November 8, 2013

Flood insurance changes may swamp homeowners

David Hurst

JOHNSTOWN — Supporters of a plan to cut federal flood insurance program subsidies championed the move as long overdue when it became law in 2012.

In reaction to Hurricane Katrina and Sandy’s wake, why should the federal government help foot insurance premiums for a millionaire’s beach house getaway, lawmakers on both sides of the aisle said.

But the ripple effect also is washing onto the main streets and blue-collar blocks of the nation’s river cities and towns.

Subsidy cuts the new law enacted threaten steep hikes to flood insurance rates federally-mandated for those buying property in FEMA-designated “high risk” areas such as downtown Johnstown, Harrisburg and parts of Pittsburgh, Brett Insurance Agency President Jim Brett said.

 For struggling areas such as Johnstown, it could be “devastating,” he said. The unexpected added annual expense could make home ownership unaffordable for recent home buyers or prompt prospective buyers eyeing a new home or business to shy away from flood zone neighborhoods.

Longtime homeowners in flood zones wouldn’t see the rate changes, but it could make selling their homes “a nightmare” because buyers would be forced to pay the higher insurance rates, he added.

“You think you have all of your monthly expenses into consideration and something like this happens,” said Lisa Broadwater, a co-owner of The Vault Salon and Spa on Main Street.

The Vault’s doors opened downtown in the months following the act’s July 2012 passage, meaning her property falls under the new guidelines.

Broadwater’s current $300 per year flood insurance cost is likely to jump to $679, she said.

Brett said some early annual estimates are worse, jumping from a few hundred dollars to more than a thousand per year.

‘Just the beginning’

Brett said he is just beginning to field calls from worried clients.

Subsidy cuts through the Biggert-Waters Flood Insurance Reform Act just went into effect on Oct. 1, but premium rates don’t change until annual renewal notices arrive, he said.

Those affected are told an elevation certificate must be obtained, a process requiring work by a certified land surveyor, the law stipulates. That process often costs $600 to $1,000, depending on the surveyor’s fees, Brett said.

“The sad thing is that for most people with homes at street level, the elevation certificate is just telling them what they already know, that they need flood insurance,” he said.

But the results help determine new flood insurance rates for homeowners, Brett said.

Brett pointed to a policy for a West End homeowner with a $26,000 mortgage, one currently required to carry flood insurance in his “high risk” neighborhood.

The homeowner’s annual 2012 premium carrying a $5,000 deductible:  $287

His premium for next year: $1,216.

“These are people that followed the rules. They bought a property, obtained flood insurance like they were supposed to, and then they turn around and get hit with something like this,” Brett said.

CNN Properties’ Bill Trevorrow, a longtime real estate broker, described the new law as a potential “death knell” to many of Pennsylvania’s struggling downtowns.

For Johnstown, already saddled with sewage replacement mandates, “it’s like a kick in the gut,” he said.

“It’s going to make properties downtown either totally unsaleable or the owner is going to have to basically give it away to find a buyer,” Trevorrow said.

How it started

Brett wasn’t surprised Congress ushered in sweeping changes to the National Flood Insurance Program last year.

Major East Coast disasters helped put the program $25 million in debt, partly because payouts in disaster areas were sometimes ballooned by inflated local market rates, the bill’s supporters noted at the time of its passage.

“Something had to happen,” Brett said.

It was the way the Biggert-Waters law addressed it –  through widespread cuts – that shocks Broadwater.

“I realize we’ve had floods here, but this isn’t the Gulf Coast. This is Johnstown. We’re not going to get a hurricane,” said Broadwater, who will have to start paying higher rates in December. “It’s crazy.”

Trevorrow agreed.

It’s one thing if a property is being damaged regularly by flooding, he said, noting some low-lying areas across the nation see major flooding almost annually.

“But just punishing everyone. It’s absurd,” he said.

A sea change?

There’s room for hope though.

Sparked partly by real estate agent worries and confused or angry voters, lawmakers across the hurricane-prone South are seeking to delay or change the new guidelines.

Mississippi sued the federal government last month to block the rate hikes, pointing to figures that 41 percent of homeowners living in areas where flood insurance is mandatory fall under low to moderate income guidelines, The Associated Press reported.

On Oct. 10, Florida joined the lawsuit.

Even the 2012 law’s co-author – Rep. Maxine Waters, D-California – is now backing efforts that would delay rate hikes for most affected by the changes.

Under a proposal introduced last week, only homes that have been repeatedly flooded in recent years and “second homes” would see increases. Those hikes would be phased in 25 percent annually over a four-year period.

“I’m extremely concerned about reports that homeowners in certain areas are facing high and unsustainable flood insurance rates,” Waters said in a press release.

“The intent was not to impose punitive or unaffordable rate hikes that could make it difficult for some to remain in their homes.”

U.S. Sen. Bob Casey is among those who have joined the bipartisan group of lawmakers seeking to delay the rate increases, Casey’s spokesman, John Rizzo said Thursday.

“It’s essential flood insurance reform doesn’t jack up rates for residents,” Rizzo said.

Edward Yapp, U.S. Rep. Keith Rothfus’ spokesman, said their office “would like to learn more about constituents’ specific situations and assist where we are able.”

The proposed changes cleared a bipartisan committee but a date for their consideration on the House floor was not set as of this week.

David Hurst is a reporter for The Tribune-Democrat. Follow him on Twitter at