On Friday, the Federal Emergency Management Agency will incorporate climate risk into the cost of flood insurance for the first time, dramatically increasing the price for some new home buyers. Next April, most current policyholders will see their premiums go up and continue to rise by 18 percent per year for the next 20 years.
Homeowners in inland states such as Iowa, Missouri and Nebraska, where creeks, streams and rivers overflow during heavy rains, will also see price increases in their government-backed flood insurance.
This is a perfect example of how industry is going to drive how we're addressing climate change. Insurance companies are going to effectively force people from those areas unless something is done immediately.
Part of me gets this & agrees with it....when I think of people building million dollar homes on the Florida coast. But I also worry about the very low-income people who already have housing issues. I just wish that more of the cost of climate change (pollution) was targeted at those who are contributing the most, not just those impacted through no fault of their own.
We shall see if this is really true:
Most homeowners will see modest increases starting at $120 per year in addition to what they already pay, and a few will see their insurance costs decrease. But wealthy customers with high-value homes will see their costs skyrocket by as much as $14,400 for one year. About 3,200 property owners — mostly in Florida, Texas, New Jersey and New York — fall in that category.
Post by sillygoosegirl on Oct 4, 2021 13:53:43 GMT -5
I fear industry will just push to have this reversed. Particularly developers who want to develop those areas, groups of rich Florida retirees, etc.
It would also be nice if we could be pushing the price onto those changing the climate, rather than those who are unlucky enough to live or own property in places no longer inhabitable, but... well, we all know how that's going.
I agree. I think insurance would win out because there won't be any money to pay the claims at their current rate dealing with climate change. It would become untenable.
A developer could build and a wealthy person could own it, but they would be out of pocket on risk, and most don't have that kind of cash. Some rich people do have an extra 5 million hanging around just in case. Developers might not want to take the risk too, if their properties are not sellable.
I wonder if developers will find a way of hiding the true costs until post-purchase. I’m thinking of new condos with artificially low HOA fees because the developer controls them until all the units are sold, then the buyers figure out that there’s a lot of maintenance that isn’t included in the current budget. I could trying something like that, but with insurance. I don’t know if it would be possible though. I knew nothing about insurance when we bought, and since I still haven’t had to make a claim (knocks wood), there’s still a lot I’m probably stupidly unaware of.
I would like it to work though - remove the financial incentive to push out costs onto everyone rather than the people directly benefitting. I’d like to see something similar for wildfires, because frankly some of the issue is people building where they shouldn’t be. If they had to bear the true costs, maybe they wouldn’t. I also hope it doesn’t have too harsh of an affect on people on established communities who can’t afford to move though.
The people who live in the affected areas are probably going to have to move in either case. They need that insurance for a reason. How many times will they get flooded out before they are forced to move?
I'm reminded of another article a few years ago about people along the New York/New Jersey shorelines who can't even get insurance on the houses they own because they're so high risk for flood. Because they can't get insurance, they can't sell their properties, and have virtually no equity in their homes, which leads to not being able to move.
The people who live in the affected areas are probably going to have to move in either case. They need that insurance for a reason. How many times will they get flooded out before they are forced to move?
I work in a flood town. People don't leave until the township/FEMA buys their house.
Fun fact, you do not need to purchase flood insurance if you don't have a mortgage. I learned this as my landlord owns the building outright for over 30 years now and my rent is way cheaper than it probably should be.
The people who live in the affected areas are probably going to have to move in either case. They need that insurance for a reason. How many times will they get flooded out before they are forced to move?
I work in a flood town. People don't leave until the township/FEMA buys their house.
Fun fact, you do not need to purchase flood insurance if you don't have a mortgage. I learned this as my landlord owns the building outright for over 30 years now and my rent is way cheaper than it probably should be.
Correct - you don’t have to purchase ANY insurance if you own your home.
The people who live in the affected areas are probably going to have to move in either case. They need that insurance for a reason. How many times will they get flooded out before they are forced to move?
I work in a flood town. People don't leave until the township/FEMA buys their house.
Fun fact, you do not need to purchase flood insurance if you don't have a mortgage. I learned this as my landlord owns the building outright for over 30 years now and my rent is way cheaper than it probably should be.
As a tenant, does that effect your rental insurance?
The people who live in the affected areas are probably going to have to move in either case. They need that insurance for a reason. How many times will they get flooded out before they are forced to move?
I'm reminded of another article a few years ago about people along the New York/New Jersey shorelines who can't even get insurance on the houses they own because they're so high risk for flood. Because they can't get insurance, they can't sell their properties, and have virtually no equity in their homes, which leads to not being able to move.
Yes. This reminds me of a story I read recently that focused on the impacts that repeated floods were having on one middle-class street that happened to be at the tail end of an inland flood zone in Queens. It's flood-mapped, so it's the kind of place that will be affected by this change. But it's not beachfront property or what most people might think of when they think of a flood zone.
Most people can't afford to just walk away from an unsellable house. So they don't give up their houses when they can't get insurance, and/or can't sell it. They rent it out to people with low incomes who can't afford other places (and maybe also can't afford renters insurance, which makes them even more vulnerable), or they stay and live in deteriorating conditions with mold, $20-$30K in repairs to vital home systems like water heaters and HVAC and maybe even structural damage that they can't afford to fix.
My parents, who own a FL beachfront vacation condo, will bitch and moan, but they can afford the higher priced insurance, or they can sell. But I think the ratcheting up of insurance rates is ultimately the first step that will end up with government buy-outs when more places are unlivable. I'm not sure there's any way to actually keep people from living there, without offering them some kind of recompense. And yeah, there will probably be some beachfront villas that get bought out along with the people who truly have no other option.
The people who live in the affected areas are probably going to have to move in either case. They need that insurance for a reason. How many times will they get flooded out before they are forced to move?
I work in a flood town. People don't leave until the township/FEMA buys their house.
Fun fact, you do not need to purchase flood insurance if you don't have a mortgage. I learned this as my landlord owns the building outright for over 30 years now and my rent is way cheaper than it probably should be.
And even when their home is bought, they're often still in a really tough situation because their home value is often nothing compared to anything else that they can buy in their market, or they have to really downgrade. At least that's what happened in our neighboring city. A lower income area of town flooded in a "500 year flood". Many homes were uninhabitable, but the value of their home wasn't much. There weren't many homes in town that were at a price range comparable to what they were paid out. It really put a lot of people in a bad position.
In our area, I'd say 95% of the homes that were flooded were not the super fancy homes. Those homes are high up on bluffs overlooking the river, not just on the same elevation as the river. Those homes have no river access, no river view, no increased property value because of the location...they're just on a flat street that eventually leads to the river.
I work in a flood town. People don't leave until the township/FEMA buys their house.
Fun fact, you do not need to purchase flood insurance if you don't have a mortgage. I learned this as my landlord owns the building outright for over 30 years now and my rent is way cheaper than it probably should be.
As a tenant, does that effect your rental insurance?
I wouldn't expect it to... rental insurance normally excludes floods.
I work in a flood town. People don't leave until the township/FEMA buys their house.
Fun fact, you do not need to purchase flood insurance if you don't have a mortgage. I learned this as my landlord owns the building outright for over 30 years now and my rent is way cheaper than it probably should be.
As a tenant, does that effect your rental insurance?
I need to read my binder but pretty sure my BOP insurance excludes flood unless I buy a separate rider. I have all the stuff stored in my work basement raised off the ground based on past flood experiences. Also from briefly digging after the last round of floods, I think the FEMA money to rebuild is for residential. Businesses affected by the floods have to take out SBA loans.
As a tenant, does that effect your rental insurance?
I need to read my binder but pretty sure my BOP insurance excludes flood unless I buy a separate rider. I have all the stuff stored in my work basement raised off the ground based on past flood experiences. Also from briefly digging after the last round of floods, I think the FEMA money to rebuild is for residential. Businesses affected by the floods have to take out SBA loans.
I can confirm this via my H who works in insurance. Rental insurance only covers stuff inside the house that you own. The landlord would have to get a separate rider on the HO insurance to cover flooding. And you can only get that rider if you live in a mapped flood plane. He's had to deny several claims because there was no flood coverage in the policy 😞
It will be interesting to see how this (op) changes things (if it changes anything).
The people who live in the affected areas are probably going to have to move in either case. They need that insurance for a reason. How many times will they get flooded out before they are forced to move?
I'm reminded of another article a few years ago about people along the New York/New Jersey shorelines who can't even get insurance on the houses they own because they're so high risk for flood. Because they can't get insurance, they can't sell their properties, and have virtually no equity in their homes, which leads to not being able to move.
This is my biggest concern. Something has to give but the reality is that not everyone can move AND homes are so often the primary (or only) nest eggs for people for retirement.
I live about inland 2 miles from the shore. We never flood, including during Sandy in 2012 and Ida just 6 weeks ago. But we still just got flood insurance because I feel like things will only get worse and eventually we won't be so lucky. It was surprisingly cheaper than I thought ($550 for the year when I expected it to be at least a couple thousand), but I guess that's because we don't need it and there's no flood history on our block. But I also do worry that we may become prone to flooding one day and it's one of the major reasons why we are sitting tight in this house that most people would consider a "starter" home. Value has skyrocketed but even if we have to suddenly move, we bought during a buyer's market and don't owe much on our mortgage, and so we can cut our losses even if we could never sell this house. How many people can say that though?
Also...as Ida showed, it's not like moving further inland would help necessarily. Many homes/communities in NYC and NJ further inland from us were devastated from Ida, for example. Like, wtf could we go to escape the effects of climate change while still staying in this area for our jobs? So, that's another reason we don't want to be so financially tied to our home.
None of this means we can't make sweeping changes to live with our changing climate, just that we've shot ourselves in the foot so many times that it's going to take a lot more effort to deal with this.