Costly flood insurance puts squeeze on owners

SANDY'S WAKE: A trailer park on Matunuck Beach Road, South Kingstown, is flooded following Hurricane Sandy in 2012. / PBN FILE PHOTO/BRIAN MCDONALD
SANDY'S WAKE: A trailer park on Matunuck Beach Road, South Kingstown, is flooded following Hurricane Sandy in 2012. / PBN FILE PHOTO/BRIAN MCDONALD

After waiting for a year, the owners of a starter home on Tidewater Drive in Warwick finally sold the property this year to a cash buyer.

No one who needed a mortgage could afford the $250-a-month premium for flood insurance on the property, which scared off potential buyers. The house sold in the $130s, according to Keith L’Heureux, the Realtor who represented the sellers.

“It sold to a cash buyer because the flood insurance was so high on the mortgage,” L’Heureux said. Seven years ago, the premium was $900 a year.

As homeowners across the state have discovered in recent years, rising premiums on flood insurance are having a direct impact on properties that carry a mortgage, or any loan, such as a home-equity loan or line of credit.

- Advertisement -

The FEMA flood insurance maps, updated several years ago for coastal areas, in October took effect in sections of Providence and Kent counties. The new map lines for the Narragansett Bay Watershed now account for the severe flooding experienced in 2010 in inland areas near creeks, brooks and other tributaries of the Pawtuxet River.

The impact of the new maps has actually decreased the number of residential and commercial structures affected in Rhode Island, according to Jessica Stimson, the state hazard mitigation officer for the R.I. Emergency Management Agency. The state agency is tasked with administering the changes made by the Federal Emergency Management Agency.

About 16,000 structures were included in flood zones under the previous maps. This year that’s down to about 13,000, she said.

Stimson attributed the revisions to more detailed topographic maps, which were prepared with aerial photos, as well as new data. The photos inform elevation changes, as well as changes that impact flooding, such as more impervious surfaces, more housing and commercial development and tree clearing, she said.

The old flood insurance maps were based on topographical information dating to the 1970s, she said. “The whole new analysis we’re seeing in this 2015 study is really the first time it’s been updated since the 1970s,” she said. “We saw a lot of properties removed from the flood plain, especially in the Providence and Kent County area. Better topographic data helped us have a better understanding of the true elevations associated with their risk.”

This despite the fact that the new maps also account for the 2010 flooding, which created new high-water marks in many areas. Data by city and town was not available, Stimson said.

More frequent, intense rain storms – a pattern that scientists often associate with climate change – will be part of the new flood map boundaries if they’ve already started happening. But projected sea-level rise is not included, she said, a factor that has frustrated state coastal-development authorities.

And as many homeowners, and would-be buyers, have discovered, a house doesn’t have to be on a water body, or near a river, to fall into a zone requiring flood insurance.

The impact of flood insurance varies tremendously, according to insurers. The federal program sets rates based on the age of the structure, the type of construction, whether it has a basement and what type, its location within a flood zone and the value of the structure, among other factors, according to Marti Longolucco, vice president at Mansfield Insurance Agency Inc., in Westerly.

In Rhode Island, 15,380 properties were insured as of Sept. 30, according to FEMA statistics. The largest number of policies were held in Narragansett, followed closely by Warwick, Newport, Barrington and Westerly.

The rates can vary from a few hundred dollars annually to several thousand, she said.

“Flood insurance is one of the most complex policies we write,” she said. The rate adjustments made in recent years were done to make the program fiscally sound, following the damages caused by the remnants of Superstorm Sandy and Hurricane Katrina.

More rate changes are anticipated, as the program expires in September 2017, at which time Congress will have to reauthorize it.

To the layperson, it can be difficult to interpret why a property is in a zone, or why the neighbor’s property isn’t. When the designation could mean several thousand dollars a year in flood insurance premiums, and exponentially more than that in lost property value, the maps have tremendous financial implications.

Sometimes, for homeowners, the flood lines recede on the maps, pulling them out of the zone.

THE ‘FOREVER HOUSE’

Bruce Lane, the immediate past-president of the Rhode Island Association of Realtors, until October paid flood insurance for a small rental house he owns in Cranston. The house wasn’t near anything but a small pond, which apparently triggered the flood-zone designation in an earlier version of the FEMA maps.

Initially, the flood insurance didn’t cost much. But after the floods of 2010, the flood insurance premium jumped by 25 percent a year, to $4,000 annually.

The real estate specialist knew that no one would buy this house, when they could buy another starter home across the street without a requirement for flood insurance. “How much more of a house could I have bought with that $300 a month,” he said. “I could have bought a house for $60,000 more. We referred to it as a forever house. Nobody’s going to want it.”

But then, in a switch that he didn’t see coming, the area surrounding the house was moved out of the FEMA flood maps that took effect in October.

In a recent interview, Lane said he had no understanding of the science behind the flood-map designations, including the one that involved that house.

“Some houses that have flood insurance are on a cove. You can go swimming and kayaking. There’s some value to them. There are a lot of properties in Rhode Island that are in flood zones, and there’s no benefit to it. There’s no body of water nearby.”

The personal experience allows him to commiserate with sellers, who if they own a home outright may have no idea the property is required to carry flood insurance. Because flood insurance is a requirement for houses or businesses with federally backed mortgages or instruments, such as lines of credit or equity loans, the homeowner that long ago paid off a mortgage may be unaware their property is now in the flood zone.

Once they, or their heirs, move to sell a property, they will be told it will require flood insurance if the buyer uses a mortgage.

Because this can mean tens of thousands of dollars in lost equity, Lane and other real estate professionals advise homeowners to hire a licensed surveyor or civil engineer, to determine if the elevation of the house will remove it from the flood insurance requirement. Just because a property is in the zone doesn’t mean the house is low enough to flood.

It’s worth the money to investigate, said Lane, who had a seller who recently was able to remove a house from the flood insurance requirement.

Longolucco said she recently was able to reduce the premium for a customer, from $2,407 to $477, after a certificate determined the property was just outside a high-risk zone, and into a more moderate zone instead.

Property owners in 21 coastal communities have already had a few years of experience in interpreting the FEMA maps.

Hurricane Sandy, which landed in Rhode Island as a reduced-force tropical storm in 2012, nevertheless was a wake-up call for many property owners on the coast.

It inspired some coastal communities, notably Westerly, to amend building regulations to require greater elevations in flood-prone areas for new construction.

As a result, several homeowners and businesses in the Watch Hill area of Westerly have constructed houses on pilings, or elevated first-level areas to heights above the flood line.

SEA-LEVEL RISE

But for reasons that some Rhode Island officials say they don’t understand, the maps reduced the exposure of some coastal areas to flood insurance requirements. The maps do not take into account sea-level rise and are fundamentally flawed, says Grover J. Fugate, executive director of the R.I. Coastal Resources Management Council.

“Bottom line, it’s a mess,” he said.

The FEMA maps set the flood rates for insurance premiums for home and business owners, he said, but they also carry greater weight.

“They’re much more than that,” Fugate explained. [The maps] get embodied into the state building code and they form the basis for which people need to build to, to get their building permits,” he said.

Several issues are troubling to Fugate about the new maps, which he has repeatedly communicated to federal officials, to no real avail. He said he has met several times with Gov. Gina M. Raimondo, to relay his concerns, and she has appeared more interested in hearing him out.

Raimondo could not be immediately reached for comment.

Several years ago, at Fugate’s request, Malcolm L. Spaulding, professor emeritus at the University of Rhode Island, analyzed the changes in the Washington County maps. This was the first set the CRMC became concerned about, Fugate said, because at some points along the coast, FEMA had lowered the base flood elevation by 3-4 feet.

This has the effect of removing more properties from the requirements for flood insurance, Fugate said.

Because the model used by the federal agency does not account for rising sea level, which scientists attribute to climate change, it is underestimating the impact on coastal communities, and leading to flood-level construction standards that will not survive a 30-year mortgage, he said.

“FEMA is always looking in the past,” Fugate said. “They’re looking at the historical data. It’s like trying to drive down I-95 looking in your rear-view mirror. You can imagine what’s going to happen to you.”

In the two years since Fugate first raised concerns with the federal agency, the maps have not been changed, he said. Following a meeting with state officials, the agency agreed to use the highest-resolution tools available for measurements in simulations. Armed with post-Sandy data generated from the U.S. Army Corps of Engineers, Fugate later approached the agency about making changes to its assessments, but he said it demurred.

“They said, ‘No thank you, we’re quite happy with our own,’ ” Fugate said.

Based on his interpretation, the interior maps affecting Kent and Providence counties have the opposite effect of the coastal revisions. They overestimate the potential for flooding, he said.

Stimson, of RIEMA, confirmed that the FEMA maps do not take into account calculations of sea-level rise. But they do mark the past 40 years of recorded information, she said.

Of sea-level rise, she said: “There has been talk of how best to start incorporating that into planning mechanisms, but it has yet to be captured in these flood insurance rate maps. If you think about flood insurance rate maps, I’m being rated on a risk I’m living right now, not necessarily what the future could potentially be.”

“These maps are truly a snapshot in time. They’re meant to be based on the best available data we have right now,” she said.

In areas where the maps took effect in October, the impact is still being registered.

According to Lane, real estate agents will explain to homeowners selling properties now affected by flood insurance requirements why they have lost real value, in comparison to neighbors whose homes appear similar, but are outside the water lines.

FLOOD PRONE

Cities also are grappling with the changes, in some cases a process that predated the maps taking effect. In Cranston, where maps were last adjusted in 2009, the cumulative effect of the recent changes is not clear, said Peter Lapolla, the city’s planning director. Although the city has the new flood maps, it would need to cross-reference that to determine how many of the newly affected areas have structures.

In areas the city knows to be flood prone, it is using state and federal grants, supplemented with local funds, to offer to purchase homes that repeatedly flood. The city has acquired about four to five houses a year, Lapolla said, following the floods of 2010.

Several of them are near Amanda Street, an area along the Meshanticut Brook that has had repeated flooding. “It’s going to happen again and again,” he said.

The city plans to clear the properties, but otherwise has no set purpose for the newly acquired parcels. “Let nature take its course,” Lapolla said. “The flood plain will re-establish itself.”

Steven and Deborah Callahan don’t need a hurricane to create a natural disaster in their neighborhood. Really, all they need is a good soaker.

The couple bought their first home in 1992 on Amanda Street, when the brook that runs beside it was narrow enough for children to cross on a few two-by-fours.

They were in a flood zone from the start, and initially paid a nominal amount a year for flood insurance. But over the years, the floods became more frequent and more damaging. The couple now pays a few thousand dollars a year for flood insurance, and Deborah is concerned that when they retire, and are living on a fixed income, the increases will be unsustainable. “We’re not going to be able to afford increasing flood rates,” she said.

By the 2010 flooding, which submerged a broad area of their neighborhood, the Callahans had an informal alert system in place. As their home began to take in water, backing up the sewer, they would notify neighbors, to let them know to get things to higher elevations. As they were next to the creek, they were often the first to flood.

Now, the Callahans are in the process of selling the house to the city.

They haven’t decided where they will go. But it no longer is feasible to stay on Amanda Street.

“I’d love to stay here, but you can’t stay here,” said Deborah Callahan.

What happens next?

Fugate recommends that people engaging in new construction build with 5 more feet of freeboard, or above base flood level, to accommodate for rising sea levels that will inevitably push flood zones in further.

How many people have listened to him? Westerly is among the areas in the state that has changed its code. Many homeowners near the beach are elevating homes.

By 2016, more Rhode Island communities could follow suit, as the state’s Comprehensive Planning Act requires towns and cities to address natural hazards, including sea-level rise, in comprehensive plans, according to the CRMC.

The CRMC anticipates that Rhode Island sea levels will rise between 3-5 feet by 2100, which will create problems not only for coastal communities, but all property along the shores and Narragansett Bay.

“Sea-level rise is occurring,” Fugate said. “It’s not going away. Even if we went to zero emissions today, we’re going to see sea-level rise for the next several centuries.” •

No posts to display