Soaring flood insurance seen sinking values
Moving up or paying off the mortgage may be the only ways for some residents to afford to continue living in some of the city’s shoreline and low areas, and that’s because flood insurance promises to become prohibitively expensive.
Already, 1,867 Warwick property owners are paying $2.7 million in flood insurance premiums to cover $423 million in property value, according to Michelle Burnett, State Floodplain Coordinator with the Rhode Island Emergency Management Agency. That’s an average of $1,446 per policy.
That’s a bargain compared to potential premiums of $25,000 for $250,000 of coverage for a property 10 feet below the base flood elevation being mentioned in information provided by the Federal Emergency Management Agency. Under federal legislation, federal flood insurance subsidies are being phased out, meaning some property owners can expect to see their premiums increase annually by 20 percent and as high as 25 percent in the next several years.
Those numbers left many of the 60 attending a FEMA/RIEMA sponsored informational session last Wednesday at City Hall shaking their heads in disbelief, no less questioning what they will do. They aren’t the only ones wondering about the impact on Warwick, not to mention the state.
“It’s almost like confiscation of one’s property,” said Donald Morash of Abbott Properties.
Morash did not attend Wednesday’s session, but he expects the dramatic increase in flood insurance premiums will “have an effect on everybody’s property values.” For those with property within a flood zone, values will decline as properties become increasingly difficult to sell as potential buyers take the added costs into consideration.
Traditionally, shoreline properties are assessed a higher value but, as those values decline, a greater proportion of the tax burden will be borne by other taxpayers.
“This is another devastating blow to the economy,” said Morash.
Robert DeGregorio, a realtor with The Slocum Agency, agrees.
“It’s going to put the brakes on the economy,” he contends.
He sees other far-reaching negative effects. He said the cost of flood insurance would put many people out of the market and make shoreline property only available to the wealthy. Further, as there are many modest homes in flood zones, these people would be forced out of their homes.
Once considered a small piece of the cost of owning property – compared to a mortgage and taxes – flood insurance promises to become a major factor and a deal-breaker.
The alternative, as Tom Young made clear Wednesday night, is to take action to mitigate the devastation of flood or storm waters by elevating habitable areas of a house above the base flood elevation. Young, of the National Flood Insurance Program, made it sound easy, although that surely won’t be easy or even possible for many people.
“If you know what to do to take yourself out of the flood zone, do it,” Young urged. “I hate to pay flood insurance premiums.”
That was certainly a statement many could agree with.
Apart from physically jacking up houses, filling basements and elevating utilities, Young talked of obtaining elevation certificates. Certificates can cost about $700 and, to be valid, must be performed by a qualified surveyor, engineer or architect. The certificate states the elevation of the house, which, in concert with the flood plain map, determines where it is in relation to the base flood elevation. Young suggested neighbors might reduce their individual costs by collectively contracting to get their certificates.
By happenstance, new flood zone maps are being implemented at the same time that the Biggert-Waters Flood Insurance Reform and Modernization Act of 2012 is going into effect. The new maps were a main attraction at the informational session. Due to their good fortune, some property owners learned that they are no longer in a flood zone, thereby exempting them from the necessity to insure. Others learned they are in a zone or, in some cases, moved into a velocity zone that takes into account the effect of wave action. Their insurance premiums will increase because velocity zones are at a higher risk.
Also, as learned at the meeting, elevating livable areas above the base flood elevation is not simply a matter of meeting flood codes that took effect when insurance rate maps were implemented in Warwick in 1973. Houses built in flood zones since then don’t have basements and are constructed on pilings that elevate the first floor of livable space above the flood elevation.
In some sections of the city, especially in Conimicut and Oakland Beach, this can be more than 14 feet. The first level of these homes have been designed “to break away” during a flood or storm surge. However, if the area enclosed is more than 300 square feet, regardless of the breakaway features, it is considered livable, said Burnett.
Warwick properties receiving subsidized insurance rates were built prior to 1973. Business properties and severe repetitive loss properties will see subsides reduced by 25 percent a year starting on Oct. 1. Full-risk rates for all property owners are being phased in at 20 percent a year.
Another option to the mitigation or sale of a property is to self-insure.
This is not easy, since the government requires banks to obtain flood insurance on mortgages and loans for property within a flood zone.
The regulations have Ralph Bozzi befuddled. The owner of more than eight Conimicut properties, Bozzi said Wednesday that he has stopped construction on one house because he can’t make out what measures he must take to minimize his insurance cost.
“I’m always fighting the system,” he protested.
Burnett said RIEMA and FEMA are taking Mayor Scott Avedisian’s request that a second public information session be held for Kent County and Providence County under consideration because there was less than a week’s notice for Wednesday’s meeting. About 20 RIEMA and FEMA officials were in attendance Wednesday. The city’s emergency management director, Fire Chief Edmund Armstrong, and Ward 4 Councilman Joseph Solomon were also present.
“It is totally disheartening to me,” Solomon said yesterday.
Solomon said he and his friends and neighbors “got blindsided by this.”
“A lot of residents are going to incur exorbitant costs for flood insurance,” he said. “For many on fixed income, it ultimately is going to be cost-prohibitive.”
Solomon has a waterfront house in Conimicut and will experience a phaseout of a subsidized rate.
Solomon predicted that, with increased rates, there would be more for sale signs and more unoccupied homes, leaving only the “high rollers.”
“It’s going to take away the personality of the community,” he said.
Solomon urged residents to contact the state’s congressional delegation and voice their concerns.