The cost of the coverage has skyrocketed upward by seven times and is holding real estate hostage.
Following the rewriting by U.S. Congress of the federal flood insurance program, the monthly premiums that are paid by over 1 million homeowners in the United States are now slated to rise considerably.
The result of this increase in cost for covering the homes has had a large impact on the real estate market.
Due to the higher cost of flood insurance coverage in certain large areas, which has meant that the price of home ownership has risen considerably, the prices of the homes within those regions has started declining. As buyers start to see how the premiums would impact their lives if they purchased one of these homes, they are starting to hesitate to make a purchase, unless the price of the home is considerably reduced. This, according to Miami real estate agent, Moe Veissi, who led the National Association of Realtors, last year.
There are homes in all 50 states that receive coverage from the federal flood insurance program.
The flood insurance program currently provides $1.3 trillion in coverage. Two thirds of all of the policies – says data from the Federal Emergency Management Agency (the operator of the program) – are located in Florida, Louisiana, Texas, New Jersey, and California.
There are currently around 85 companies that are in contracts with the Federal Emergency Management Agency (FEMA) in order to be administrators of the flood insurance program. This includes Allstate Corp, and Nationwide Mutual Insurance Co.
Governors, consumer groups, and mortgage bankers, alike, have been calling on Congress to reverse the changes that were made to the law that was meant to shrink the rapidly rising debt of the National Flood Insurance Program (NFIP). This most recent measure, which is causing all of the controversy, was called the Biggert-Waters Flood Insurance Reform Act of 2012. It functions by gradually phasing in the premiums hikes for the 20 percent of policyholders across the country who have been benefiting from federal subsidies to help to pay for their coverage.
Many of the flood insurance subsidies started this gradual shrinking – or disappearance – at the beginning of this month, nearly a year and a half after the bipartisan supported law was passed.