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Official: Delayed flood rates not answer
Councilman Ladouceur says homeowners will be forced to abandon houses

With some Rhode Island residents saying they won’t be able to continue living in their homes, members of Congress who touted the Biggert-Waters Flood Insurance Reform Act when they voted for it last year, are now co-sponsoring legislation that would delay increased insurance rates for four years.

But while the legislation – the Homeowner Flood Insurance Affordability Act – could bring some temporary relief, if enacted, it doesn’t promise to eliminate premiums that could go as high as $25,000 for $250,000 of coverage.

The situation has Ward 5 Councilman Edgar Ladouceur seeing red.

“Right now they’re reacting to the public outcry,” Ladouceur said of lawmakers. “All this talk should have happened before they passed the law.”

“Unless they repeal it, it’s not going to change anything,” he said. “If they can’t get this thing rectified, people are going to walk away from [their] property.

He said Congress “needs to come up with a permanent fix to this … Let them come up with it because we can’t pass it at the local level.”

Until the specifics of the new legislation are outlined, even those closest to the issue can’t predict what it is going to mean. Michelle Burnett, state floodplain coordinator with the Rhode Island Emergency Management Agency (RIEMA), was of the opinion that the law won’t apply to secondary properties – vacation and summer homes – or businesses that will still feel the full impact of non-subsidized rates. She couldn’t say how many of the 16,123 Rhode Island policyholders would be affected. Of that amount, 43 percent are considered subsidized, she said. Flood insurance premiums for the state total $21 million. In Warwick, 1,867 property owners have flood insurance. Banks require the insurance to mortgage properties within flood zones as defined by the Flood Insurance Rate Map (FIRM).

In addition to secondary houses and business, Burnett doubts the new legislation would apply to severe repetitive loss situations. She qualified these as policyholders who have experienced $5,000 in losses more than once.

According to a release issued Tuesday by Congressman James Langevin, the bill also calls for a two-year affordability study and would apply to primary residences sold after July 6, 2012.

“Homeowners in Rhode Island coastal communities are already seeing significant increases in their flood insurance rates, rates that, for some, are unsustainable,” Langevin said in a statement. “These families have already been through enough, seeing their homes damaged and memories destroyed by the rising floodwaters in the wake of Hurricane Sandy. I understand that reforms are needed in the federal flood insurance program, but those changes should not come at the cost of someone losing their home.”

Ladouceur has called on the state’s Congressional delegation to roll back the Biggert-Waters legislation. He said last week that the measure would trigger an exodus from the city and force families that have lived in Conimicut, Oakland Beach and other costal neighborhoods for decades to leave their properties. Ladouceur also asked Tax Assessor Evelyn Spagnolo to extend the Oct. 15 deadline for property owners to appeal their property valuations, as the new insurance rates will depreciate real estate values. Spagnolo noted the deadline is set by state law and further said, until there is evidence that the rates are impacting values, there would be no way of determining the effect.

Mayor Scott Avedisian questions what can be accomplished with a four-year delay.

“It’s just freezing it [the rates] from here to here. It doesn’t solve it,” he said.

He called the effect of the Biggert-Waters Act “too dramatic and all at once.” He sees part of the issue is that new homes that meet the flood building codes are subsidizing rates for older homes that pre-date the codes and flood maps. What he is saying is borne out by the accounts of Conimicut residents in earlier stories about this issue. In one case, the owner of a relatively new house, built 14 feet above the ground with all utilities above flood elevation, is paying $9,000 for insurance, the owner of a single-story house on the water, only a block away, was paying $800.

Avedisian doesn’t have a solution. Nonetheless, he doesn’t think it right that an older couple living in a house for 50 years would be forced to leave because they can’t afford flood insurance.

14 comments on this item

If it will crush home values and tax revenues in Warwick, what will happen in New Orleans and other low areas.

Two points: First, the new rates seem completely out of whack with the financial risk assumed by the insurance companies and banks. Second, what difference does "primary residence" vs. "summer home" make from a claim likelihood perspective? It's not like a hurricane comes up the bay, stops at Patience Island, and says: "Hmmm. Those look like summer homes, but those over there look like primary residences. Yup, that's the spot." In ten years, waterfront property in Warwick will owned exclusively by hedge fund managers from Fairfield County who paid cash and use the place three months a year.

So, I am supposed to subsidize dopes who live in flood zones?

It is like people complaining that the planes make noise at the airport.

Hey Justanidiot,

Remember it is not just the houses in Oakland Beach that this will affect; the very simple fact here is this is going to mean a drop in tax revenue for the city. The reason being the value of those homes are going to drop and your property taxes will rise yet again so it is still going to cost you either way. Open your eyes and look at the big picture…

Conimicut and Oakland Beach have both been wiped out before. They should pay more to live there.

and they do more taxes.....

taxes have nothing to do with flood ins national flood ins is in the red for 24 mil dollors Were do you think all of this money is comeing from to fix homes business even the lighthouse had flood ins Wake up its time to pay up that it .can.t let this get to far from us now .like the federal budget.

Taxes for sure figure into the equation, if higher taxed properties are devalued that means less revenue for the city that will need to be made up somewhere and where will this come from? It is real simple the cities will petition the state for a higher then allowable increase (which we know we get the max increase now in Warwick every year) which the states will allow seeing the reduction in the tax revenue will be felt by the state too which gets close to 20% of the taxes collected.

Justanidiot: You are absolutely correct in that you should NOT be expected to subsidize anyone due to their poor decision-making. This should include food stamps, subsidized housing, and various other Taker subsidies. However, a small home and contents with re-build value of, say, $100k should not be paying exorbitant flood insurance premiums.

Norm 88, you are mistaken as far as tax increases go. if you look on the city website you will see that over the past 5 years every tax increase was UNDER the max. last 2 years increase was around 1.5% with the max being 4%. I am advocating no opinion as to the need for ANY increase but just advocating for using the correct info if you are goint to comment at all.

JohnStark, your last comment was a case in double speak. you agree that we should not subsidize waterfront landowners (a point I fully agree with you on) then you go on to rip other "taker subsidies" then you state that a house with a replacement cost of $100k should not be paying high premiums. My question is shouldn't rates be set by the market? and if so who are you to decide that they should not pay high premiums, shouldn't the market set those rates. by you trashing "taker subsidies" you sound like a free market supporter, and therefore you should support the insurance companies setting rates at the market and not what you think is "exorbitant". Correct?

Informed tax payer Warwick RI property tax rate FY11 17.48/1000, FY 12 17.69/1000, FY 13 18.14/1000, FY 14 19.79/1000…So it seems like both our numbers were off…






Informed: Fair point. The problem is that rates are not really set by the market. When one entity (e.g. the bank or government) can mandate that you purchase a product (e.g. flood insurance or health insurance) the rates become artificially distorted. The best example is life insurance. If you buy a policy you pay market rates based upon your mortality. But if a mortgage lender requires that you buy PMI, which is essentially life insurance with the bank as beneficiary, the rates are no longer 'market rates', but rather significantly higher and are not based upon mortatlity. Finally, the bank is the functional owner of many of these properties. It seems to me that the banks would be in a better position to negotiate better premium rates than homeowners as a function of volume.

JoshStark: Point taken. The way insurance is purchased is wrong. The bank owns most of your home and is the beneficiary of insurance you pay for. However, no one is forced to borrow from a bank, and a bank has a right to impose any conditions on borrowing is pleases, A more equitable system would be for the premiums to be split at the same ratio of ownership of property. As a borrower pays down his debt and his percentage of actual ownership increases so does his share of premium. This would encourage the banks(more powerful) to press for rates more in line with cost of replacement, while not letting the homeowner abdicate his responsibility of maintaining the asset.

I am however very happy that the federal government (our tax money) is getting out of the property insurance business. If I buy a bright red mustang GT I pay a much higher insurance premium than for say a pick up truck. So it should be that if I buy a home on the waterfront, I should be prepared to pay an insurance premium much higher than someone inland. BTW, it is actually nice to see a coherent discussion on this board rather than the normal bs.

though the Fed's are getting out of the property ins. business we all know that they are in the health ins. business now... But keep in mind the government does infact regulate all insurance on the state level using he Dept of Incurance....

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