Flood Insrance - What you need to know before you purchase a home in Florida Keys

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New flood rates shut couple out of housing market

BY RYAN MCCARTHY KeysInfoNet

Marathon residents Michelle Clinger and Rich Smith thought they finally found the house for them.

The couple was set to close on a dry lot, "pre-FIRM" house in the Crane Point Hammock residential subdivision off 52nd Street until they received a pair of flood insurance quotes with staggering annual premiums of $9,500 and $13,000.

Clinger, an attorney, and Smith, a flats fishing guide, have long been searching for a new home.

"Now that the prices are increasing, we knew it was now or never if we ever wanted to get a decent place in our range. We basically had to walk away from it," Clinger said.

Situations like this are the direct result of astronomical rate increases from the Federal Emergency Management Agency's National Flood Insurance Program that took effect Oct. 1. They're part of the 2012 Biggert-Waters Flood Insurance Reform Act.

The law is aimed at stabilizing the NFIP, which has been running a $24 billion deficit since Hurricane Katrina struck New Orleans in 2005, but it's having immediately disastrous effects on a fragile real estate market.

Almost every Keys homeowner with a mortgage has depended on subsidized NFIP rates for affordable flood coverage, but owners of second homes and pre-FIRM houses are being hardest hit out of the gate.

Pre-FIRM refers to houses built before January 1975, when FEMA's flood insurance rate map came into existence. Many of those homes, like the one Clinger and Smith were eyeing, are older and built at or below base flood elevation.

Blowback from Florida officials was immediate, as Gov. Rick Scott and U.S. Sen. Bill Nelson each called for a delay to the Biggerts-Waters taking effect. The state of Mississippi has filed a lawsuit against the federal government to stop the law.

On Sept. 28, a law called the Flood Insurance Fairness Act of 2013 (H.R. 3218) was introduced in Congress. It's co-sponsored by 11 Congress members from Florida, including current and former Keys U.S. Reps. Joe Garcia and Ileana Ros-Lehtinen.

Garcia said "several local leaders and homeowners came to me addressing their trepidations" and that he wanted to take action to protect affected homeowners.

"Now that rate increases have been implemented, I hope people suffering their effects will continue to urge their representatives and senators to act, increasing support for legislation aimed at addressing these issues and thus, hopefully, pushing something through by public, nonpartisan demand," he said.

That could be a tall order, though, as the federal government endures its second week of shutdown due to bitter partisan discord related to the Affordable Care Act, President Obama's signature accomplishment. The U.S. House won't vote to reopen the government unless the ACA is defunded.

Fair Insurance Rates in Monroe President Heather Carruthers, also a county commissioner, said she's aware of H.R. 3218, but that it's unlikely to move forward any time soon.

"Unfortunately, this shutdown really gums up the works," she said. "Nothing is going to happen until this deadlock is broken."

FIRM, which largely concentrates its efforts on trying to lower windstorm insurance premiums, is working with local real estate associations to combat the Biggert-Waters Act.

"We obviously believe FEMA shouldn't enforce the rates because part of the act specifies an economic study had to be done and it never was," Carruthers said, adding that residents should be given time and a "funding mechanism" to mitigate their homes against flood damage.

The average Keys mortgage holder had paid $650 to $1,000 per year for flood insurance, but insurance agents up and down the Keys are quoting new annual premiums as high as $43,000 per year depending on the type of house and its location.

In the meantime, Clinger said she and Smith have an offer in on another a dry lot Duck Key Home. The fear is that flood insurance quotes could kill that deal, too.

"I'm going to stay here; I'm not a transient. This is where I'm going to be and have children one day. It's hard when I'm being priced out of the market," she said.