NEW ORLEANS – Tens of thousands of homeowners in Louisiana face major flood insurance spikes now that the Biggert-Waters Flood Insurance Reform Act of 2012 has gone into effect.
Realtors say it’s already causing home sales to fall through when buyers realize they can’t afford the flood insurance.
“Reality is just beginning to hit home,” said Evelyn Wolford, Latter & Blum branch manager and president-elect of the New Orleans Metropolitan Association of Realtors. “It’s premature for the buying public to understand what’s going on.”
But by the end of the year, Wolford anticipates “rolls of people will fall through on sales.”
The Biggert-Waters Act is being phased in, with the first reforms beginning Oct. 1. And the first round of people affected are those with subsidized flood insurance.
For years, they were allowed to pay lower rates because their homes were built before the original flood maps were adopted decades ago. Now, those with subsidized insurance on businesses, secondary homes, and homes that have flooded multiple times are seeing rates skyrocket.
Rates are also spiking for new purchases, dating back to July 2012.
Bettye “BJ” Candies bought her LaPlace home after Hurricane Isaac, in the fall of 2012. A year later, she faces losing the house she worked so hard to rebuild because her flood insurance is increasing five-fold, to nearly $8,000 a year.
“I'm a single mom, I pay all my bills, and I cannot afford to pay that type of flood insurance premium,” she said.
Candies situation is especially ironic, because she's a longtime insurance agent who sees the larger impact of the reforms.
“It's already caused people not to buy homes and give up sales, the seller’s devastated, the new buyer that's invested all this money to buy the new home is devastated, and now they have to start from scratch,” she said.
The Biggert-Waters Act is set to expand in the coming years. Coupled with new FEMA flood maps that could place thousands more people inside flood zones, the effects of skyrocketing flood insurance rates on the metro areas housing market will likely be even more far reaching.
“I hate to see what's going on with the market right now and what kind of negative impacts this could have,” said Kelli Walker, director of government affairs with the New Orleans Metropolitan Association of Realtors. “I think the biggest problem we're seeing right now with home sales is people are concerned and they don't know when those maps are coming out, so there's a little hesitation in the market.”
It’s unclear when the new FEMA maps could be adopted, and it’s possible that parishes will appeal them. In some cases, homes would actually see a decrease in their flood insurance due to the new maps. In other cases, they could see their insurance increase by thousands of dollars a year, making their home unaffordable.
“If we lose our home nobody's going to come back and buy them, so we have whole neighborhoods and whole communities that are going to be just deserted because nobody can afford to live there,” said Candies.
State officials are asking the federal government to delay the expansion of the Biggert-Waters Act, but that decision is on hold because of the government shutdown.