End of flood insurance subsidies will impact coastal markets
It’s no secret that Americans are willing to pay more for a beach property. They could soon pay hefty insurance premiums to live there as well.
“The Holy Grail”: Why Hamptonites Pay Such A Premium For Waterfront Homes
Beginning Oct. 1, the federal government plans to begin gradually reducing subsidies for its flood insurance programs, pushing up rates for homeowners, according to the New York Times.
For the first time, the government will also factor in the size of a home, which means owners of large beachfront properties are exposed to even larger rate hikes.
Federal officials say the changes are intended to highlight the real risk homeowners face in flood-prone areas and potentially encourage them to move to less vulnerable areas.
Benjamin Keys, a professor at the Wharton School at the University of Pennsylvania, said the cut in subsidies is likely to impact residential development and house prices.
“Subsidized insurance has been essential in supporting coastal real estate markets,” Keys said. “It’s going to require a major overhaul of coastal life. “
The rate hikes will be phased over several years. Florida, prone to hurricanes and flooding, can experience some of the most drastic hikes.
Insurance agent Jake Holehouse said one of his Tampa-area clients currently pays $ 480 a year for flood insurance. Its rate under the new system could reach $ 7,147 per year.
California is grappling with its own climate change insurance debacle. Private insurers have started removing coverage from areas prone to forest fires, prompting the state to stop them.
[NYT] – Denis lynch