Flood Insurance Rates Skyrocket, Threaten Homes
In February 2013, Bart and Clare Cannizzaro saw an opportunity for investment.
It wasn’t simply a financial investment such as buying stocks or bonds, but an investment in a town, in history, in a beautiful old home, in their family.
The home at 300 Clark Street was in foreclosure and the lender was looking for a buyer. The Cannizzaro family carefully considered the option to buy this piece of New Martinsville. The home was in a state of disrepair, but they thought that through some investment of money, time, and love, it could make a fine home for their young family of four.
They knew it was in the flood zone, as is most all of New Martinsville’s historic district. But they also knew the home was built in 1902 and has never sustained any structural damage.
Flood insurance is necessary for any federally backed loan, such as the one they would get to facilitate their purchase and fund their dream. Flood insurance would be $437 per year. That fit their budget, so the purchase was made.
“We bought it looking at it as a 50-year project,” said Bart.
But now, just one year into that timeline, changes in the National Flood Insurance Program have put a big wrinkle in their plans.
The Biggert-Waters Flood Insurance Reform Act of 2012 was passed in July 2012. According to FEMA, the act “calls on the Federal Emergency Management Agency (FEMA), and other agencies, to make a number of changes to the way the National Flood Insurance Program (NFIP) is run. . . Key provisions of the legislation will require the NFIP to raise rates to reflect true flood risk, make the program more financially stable, and change how Flood Insurance Rate Map (FIRM) updates impact policyholders. The changes will mean premium rate increases for some-but not all-policyholders over time.”
In December the Cannizzaros, like others who own property that requires flood insurance, received a letter outlining the changes brought about by the Biggert-Waters Act and how it would affect them. As it turns out, everyone who purchased property in a flood plain after July 2012, when it was passed, would be required to pay “full risk rates” as of Oct. 1, 2013.
What does that mean? It means the Cannizzaro family’s annual flood insurance rate went from a manageable $437 to possibly $3,500 to $4,000.
To make matters worse, the Cannizzaros have a second piece of property in the Wileyville area that also requires flood insurance. This modest home, which they refer to as a one-room cabin, is now rented for a minimal amount. Combined, the properties will now require approximately $8,000 worth of annual flood insurance.
“Why wasn’t there more notice?” Clare recently asked Congressman David McKinley in a discussion about the issue held at the Wetzel Chronicle offices. “We can’t come up with eight-grand in two months!”
She further said the exorbitant cost, even for the cabin, cannot be passed on to their renter as it is just too high. It would surely stand vacant if the rent was raised that much.
But those who purchased property prior to the act are not immune. The legislation calls for them to see at 25 percent increase in premium rates each year until premiums reflect full risk rates.
The Cannizzaros are not alone. This is a scenario being repeated over and over again throughout New Martinsville, in towns along the Ohio River, and across the United States.
Just a block away from the Cannizzaros’ home live Jeremy and Sarah Shepherd, who also purchased their home after the Biggert-Waters Act was passed. Their annual flood insurance premium, on $95,000 in coverage, went from $755 last year to $7,611 this year.
Both the Cannizzaros and the Shepherds say they simply will not pay those high premiums.
“We don’t have the money to do that,” said Bart. “We won’t pay it. If it isn’t repealed, we will most likely be foreclosed upon.”
Shepherd agreed, “We aren’t refusing to pay this out of protest, we just financially cannot pay it.”
Thankfully there is some hope on the horizon. On Jan. 30 the U.S. Senate passed Senate Bill 1926 by a vote of 67 to 32. It would delay the implementation of the act for four years.
That bill has now passed to the house, but Bart says it may never get to the floor for a vote if Speaker of the House John Boehner doesn’t bring it up for a vote.
McKinley, who represents the First District of West Virginia, which includes Wetzel County, said, “I have some comfort that we are going to be successful in delaying it.” He further said action by the Senate first, before the House, is a good thing.
During the proposed four-year delay FEMA is to finish their affordability study that will give some more insight into the flood insurance situation and perhaps more accurately set costs. “But will they complete the study?” asked Clare. “It was supposed to be done before.”
McKinley said he wants to be sure money spent for flood insurance is for flood coverage and limit the assistance to only those with flood insurance.
He noted hurricane damage is covered by homeowners insurance, not flood insurance. FEMA’s costs from hurricanes Sandy and Katrina are being cited as reasons for the NFIP increases. Of FEMA’s $25 billion shortfall, McKinley said $17 billion was spent on repairing the levy that protects New Orleans. He says that is not an acceptable use of NFIP funds.
“A river flood is different from a hurricane flood,” Bart told McKinley. The representative said he fully understood that, having been through several floods himself. His former business was in the flood plain in Wheeling and his grandmother lived on Wheeling Island.
McKinley sees part of the problem as a conflict of understanding between urban centers and rural areas. “By far the urban centers out vote rural America,” noted McKinley, saying places like Chicago and Los Angeles have no understanding of flooding.
“This is an example of bureaucrats not knowing how America works,” said McKinley.
When the Cannizzaros told McKinley how FEMA was requiring them to pay approximately $500 for a survey of their property in order to get an elevation certificate, proving the property was in the flood plain, McKinley was shocked. “You shouldn’t have to prove it is in a flood plain,” he said, noting the maps have been drawn for decades. “It is an unnecessary step. It is burdensome. This just has to stop!”
That is exactly what the Cannizzaros, Shepherds, and countless property owners across the United States are hoping. That is why they are speaking out as often, as loudly, and to as many people as they can. Bart and Jeremy attended Monday night’s New Martinsville City Council meeting to seek their help in support for the delay and ultimately opposition to the bill.
“This is very important for this town,” said Bart.
Mayor Keith Nelsen said he would be willing to write a letter and have council sign it, then send it to Boehner, asking the delay be brought to the house floor for a vote.
Councilman Steve Pallisco volunteered to chair a committee focusing on the flood insurance issue. “This action needs to be done now,” said Pallisco. “We all need to be a part of this.”
Bart suggested they reach out to financial institutions to get them on board to fight the Biggert-Waters Act. They will be the ones left with virtually worthless properties if the rates necessitate foreclosures.
He further noted the insurance companies are one of the biggest proponents of the act. “The insurance companies are not for the delay of this,” said Bart, adding that AllState gets 30 percent of all premiums for some administrative duties.
“Their biggest risk (for corporate insurance) is maybe getting a paper cut filling out the paperwork,” said Jeremy.
In conclusion, Bart said his home, which is over 100 years old, does not have a single loss on file with FEMA. Jeremy said his flood policy has a $2,000 deductible, more than probably the value of everything in his basement.
Besides that, he said a river flood is not like a flash flood. There is ample warning and those within the flood’s possible path have time to remove any valuables, such as furnaces, hot water tanks, and laundry facilities.
“And FEMA doesn’t pay a dime for that,” added Pallisco.
Why Was It Passed?
Bart and Clare Cannizzaro asked Congressman David McKinley why he, and all other representatives of West Virginia, voted for the Biggert-Waters Flood Insurance Reform Act. They wondered if it was even noticed, as it was part of a much larger Federal Transportation Bill.
“It was noticed,” reassured McKinley.
He explained that the five-year transportation bill was up for renewal in 2010 or 2011, but the legislature had simply been extending it. “That’s not an appropriate thing to do,” said McKinley.
Consequently they were looking to finally pass an appropriate bill. The NFIP was about to expire and required passage to even continue. He said realtors were pushing for it to be renewed and the legislature could not find a time to fit it into the session. Consequently, it was included with the Transportation Bill.
“The American public has a perception that a lot of things are added to a bill that aren’t germane to the subject,” said McKinley. He said this simply is not the case, as items that are not tied to the matter at hand will be thrown out.
Biggert-Waters could be part of the transportation bill because there are highways in flooded areas, said McKinley.
“We knew there were some problems with it,” said McKinley. But he said it could not be amended because virtually no amendments are made from the floor, they must be made in committee.