Major Flood Insurance Changes

There is some MAJOR news taking effect that has largely passed under the radar in regards to flood insurance. Any owner of a home within a flood zone needs to be aware of these changes and any potential buyer of a similar property should be in tune as well. Effective this past Tuesday, October 1st, the federal government’s subsidy of the National Flood Insurance Program has ended. This change will lead to premiums rapidly rising in efforts to try and allow the program to become more self-sustaining. For example, FEMA quoted a new rate effective on October 1st for homes 4 feet below the agency’s base-flood elevation as $9,500 a year. Individuals with homes at FEMA’s base elevations would be looking at around $1,410 a year, while homes 3 feet above the base-flood elevation would pay only $427 a year. However, some high-risk areas could see premiums exceed $20,000 a year!

This change is unrelated to the recent government shutdown but rather is a result of the National Flood Insurance Program’s deficit, which is reported at $28 billion. Congress passed the Biggert-Waters Flood Insurance Reform Act in 2012 in an effort to keep the program solvent for the long term. With storms such as Hurricane Sandy, Irene & Katrina, not to mention the recent Colorado flooding, the program has incurred huge losses. The Reform Act eliminates current subsidies for some 20 percent of policyholders in total, while others may not yet be affected. There are major efforts being made in Congress to delay or reform these changes, but especially with the government shutdown those efforts may not be successful. States with a huge number of affected homeowners like Florida & Louisiana are leading the charge but the economic realities of the risk these homes face may be too difficult to overcome.

Most homeowners, particularly in Arizona, don’t have flood insurance and if desired it could become even more challenging to get and certainly more costly. This change will dramatically affect homeowners that are in flood areas where flood insurance is required and may in many cases make the homes unsustainable for their owners. Locally there are parts of Marana and Tucson that are notably in FEMA defined flood zones. Even some areas of Marana which successfully removed their flood designation may see future boundary changes which would again cause a major hardship. This could become a massive issue for certain communities and not only effects the current owners with higher premiums but will absolutely negatively impact their property’s value. Potential new buyers will be factoring in costs of flood insurance and will most certainly not pay as much for these homes as similar homes in other areas that don’t require flood insurance. If you are in a flood area (or nearby one which could see its boundaries change) or know someone who is please pass along the information and look into this issue further for more information.

Stephen Woodall
REALTOR, GRI @ Long Realty Company
Stephen has made real estate his full-time career and passion since 2008, primarily specializing in the Foothills & the Northwest Tucson areas of Oro Valley and Marana. He is a multi-million dollar producer, representing both sellers & buyers. Stephen has tremendous experience in new home sales, listing & selling primary residences, listing & selling vacant land, listing & selling luxury homes, investment properties, rentals, and real estate development parcels.

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