Flood Insurance Reform Could Leave Landowners Underwater With Staggering Rate Hikes
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SUTTER COUNTY (CBS13) — California landowners are about to face flood insurance increases of potentially thousands of dollars in coming years, and that might just be the beginning.
The Biggert-Water Flood Insurance Reform of 2012 will phase out discounted, government-subsidized flood insurance the federal government says it can’t afford to offer anymore.
Landowners like Dan Silva who paid the subsidized rate will now have to pay the actuarial or true market cost for flood insurance. That increase will be phased in over the next four years.
“It’s just insane,” the Sutter County walnut farmer said. “I would saw it’ll knock more than a quarter of the bottom line off.”
Right now, Silva pays out $6,000 a year to insure a shed. Rough estimates have that amount jumping by 25 percent each year. That means $14,500 next year, $23,000 in 2015, $31,500 in 2016 and a whopping $40,000 in 2017.
That kind of cost, Silva says, could put him out of business.
Dan Peterson, the water resources chief in Sutter County, says the cost of repairing damage by Hurricanes Katrina and Irene, as well as Superstorm Sandy, put the National Flood Insurance Program offered by FEMA $26 billion in debt.
“It looks like there’s going to be thousands of families that could end up losing their homes or businesses that could go out of business because they cannot afford flood insurance premiums,” he said. “FEMA is being told by Congress, ‘You have to pay us back in 10 years.’”
And Peterson says the worst is yet to come. Millions pay what’s called the preferred-risk policy. Because of that debt, homeowners will likely see their rates spike from about $300 to $500 a year to $4,000 to $10,000 a year.
“We could see the elimination of entire small towns in rural communities,” Peterson said.
Adding to this is the fact that FEMA has redrawn flood maps in recent years, adding more properties that are now required to purchase flood insurance.
Critics hope Congress will take a second look and freeze the rate hike.