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REALTORS® Urge Delay in Applying New Flood Maps, Phase-out of Rate Subsidies  

With implementation of several significant changes to the National Flood Insurance Program (NFIP) on October 1st, thousands of residential and commercial property owners in Massachusetts and across the U.S. are facing substantial increases in flood insurance premiums that could force them out of homes and businesses and threaten the recovery underway in the nation’s housing market.  In response, REALTOR® leadership has voiced concerns about the NFIP revisions and the future affordability of flood insurance to both federal lawmakers and regulators over the past several weeks, urging immediate action to delay the scheduled rate increases and study opportunities to reduce the financial impact on local communities and especially homeowners.

The most troubling revisions approved as part of last year’s legislation granting a five-year re-authorization of the National Flood Insurance Program are the phase-outs of lower insurance rates for older, grandfathered homes that pre-date the implementation of flood maps (i.e. those built on or before December 31, 1974 or before the effective date of the initial Flood Insurance Rate Map (FIRM) published for a community) and rate subsidies for properties purchased following passage of the Biggert-Waters Flood Insurance Reform Act in July 2012 (BW12).  In addition, the separate, but simultaneous redrawing of flood maps this year to expand flood plains and raise water elevations have resulted in sharply higher insurance premiums for many property owners, even in instances where they have built homes to code and/or their property has never previously flooded.  The rate increases appear to have little justification other than to make the NFIP solvent, say REALTORS®, yet the opposite could occur if countless home and business owners are unable to afford their premiums and forced out of the program completely.

In addressing the issue, the National Association of REALTORS® (NAR) has sent a letter to the administrator of the Federal Emergency Management Agency (FEMA) urging a delay in the implementation of new premium rate increases until an affordability study of their impact on consumers is completed and reviewed by Congress as directed in the Biggert-Waters Act.  NAR also has called on FEMA to hold a national implementation summit to further assess the impact of the rate increases, outline a plan for delaying the law’s requirements, and identify methods to help property owners and communities lower their flood insurance rates.  And, on the local level, GBAR leadership has either met with or written to U.S. Senators Elizabeth Warren and Edward Markey and Bay State Congressmen Michael Capuano (D-Somerville), Joseph P. Kennedy, III (D-Newton), and Stephen Lynch (D-Boston) in recent weeks to ask for their support of a delay in the premium rate increases and phase-outs of rate subsidies for both grandfathered pre-FIRM properties and those purchased after July 2012.

Notably, lawmakers and regulators on Beacon Hill have also started to take notice of the impact the issue could have on the Bay State.  On October 15, Massachusetts House Speaker Robert DeLeo (D-Winthrop) and state Attorney General Martha Coakley joined together to file legislation that would limit the amount of insurance homeowners in a flood zone must purchase in an attempt to lower premiums for impacted property owners.  Specifically, the bill seeks to limit the amount of flood coverage a homeowner or business must purchase to the value of the mortgage on the property, rather than the replacement value of the home.  Under the measure, creditors also would be prohibited from requiring coverage for contents of the home or including a deductible less than $5,000.  Additionally, AG Coakley is exploring her options to determine if the Commonwealth can move to block recent changes to the NFIP from taking effect.  As reported in a Patriot Ledger article last month, the Mass. AG’s Office, like NAR, is specifically interested in ensuring that FEMA adhere to BW12 and the law’s requirement that the agency complete an affordability study. 

In the days and weeks ahead, the REALTOR® organization will continue to press for a delay in full implementation of NFIP revisions and rate changes, as well as reasonable legislative efforts to mitigate the financial costs to property owners. IN the meantime, , we encourage you to take advantage of the resources available to you to communicate with and inform buyers and sellers on the issue of flood insurance.  Mostly notably, be sure to review and follow the Flood Insurance Disclosure Guidance prepared by the NAR Legal Department on revisions to the NFIP and new rate increases, and access the NFIP Toolkit on REALTOR.org.  You also may want to watch a video of the Flood Insurance Panel presentation held earlier this month at the Massachusetts Association of REALTORS® Convention with officials from FEMA, the Massachusetts Department of Conservation and Recreation, and NAR.  The entire program is accessible via from the MAR website and on YouTube.