Owning property near a floodplain in a flood-prone area is about to get a lot more expensive.
In one of the most drastic examples in the Capital Region, than 200 property owners in the village and town of Waterford are facing annual flood insurance premium hikes of 18 percent starting this year. Additionally, two dozen businesses or second homeowners are facing an increase of 25 percent as the National Flood Insurance Program switches to a risk-based rate.
In total, 83 percent of the properties receiving subsidized flood insurance in the village will see a dramatic increase in rates. Similarly, 80 percent of the subsidized policies in the town are increasing, making Waterford one of the Capital Region municipalities most heavily impacted by the rate increases aimed at patching a $24 billion deficit in the flood insurance program.
For those owning property in a floodplain, the problem is twofold. Not only are they facing an enormous increase in the cost of insurance, the boost in premiums is deflating the market value of their property.
“It’s akin to buying a low-price house with really high taxes,” said Laura Burns, the chief executive officer of the Greater Capital Association of Realtors.
And it’s not something unique to Waterford either. Hundreds of properties across the greater Capital Region will see dramatic premium increases as federal legislators try to patch the program that offers subsidized flood insurance to homes and businesses constructed before there were many rules about building close to the water.
NYS flood insurance data
Search the flood insurance database.
Initially, these property owners were facing the brunt of the full increase all at once. But this year, lawmakers passed a bill that spreads out the increase annually through 18 percent increments for residential homeowners and 25 percent increases for the owners of businesses or second homes.
Still, these double-digit increases are creating a sense of hopelessness in some already-struggling communities. Many property owners in the municipalities along the Schoharie Creek still trying to recover from the devastating flood following Tropical Storm Irene in 2011 are now finding themselves in an irreconcilable quandary, said Jerrine Corallo, the volunteer director of Schoharie Area Long Term Inc., a regional coalition aimed at disaster recovery.
“We were sort of already struggling with economic issues, which were exacerbated by the flood,” she said. “Adding this exorbitant increase in insurance rates is certainly going to place a stress on homes in the floodplain.”
Among the hardest-hit in the Schoharie Valley is the village of Schoharie. A big increase awaits about 46 percent of policyholders in the village, where the median income is only $37,000.
“People are very concerned,” Corallo said. “Schoharie County isn’t the wealthiest of areas.”
For some, the increase means their flood insurance premiums will be almost as much as their mortgage payments. Joe Fava, a Realtor living in Schenectady’s low-lying Stockade neighborhood, said he’s trying now to help out a client who is looking at a $6,000 payment for flood insurance even though the first floor of the house remained above water during the 2011 flood.
“It’s almost impossible to sell it,” he said. “Why should your insurance be higher than your mortgage payment?”
Fava said the flood insurance in general is making property along the water a tough sell. The increases associated with the federally subsidized program add insult to injury.
“They’re almost to a point where it’ll be impossible to sell a house on the river,” he said. “Not just in the Stockade, but anywhere on the river.”
But these premiums are the only way to make the program financially stable without leaving taxpayers on the hook, said Cassandra Anderson, a spokeswoman for the New York Insurance Association. She said the subsidized rates frequently don’t reflect the risk faced by homes or businesses built in a floodplain.
“That’s the reality, unfortunately.”
Anderson said the focus should be on ensuring there are stronger measures in place to prevent development in flood-prone areas. She said modern codes also need to reflect a stricter standard than the past, so that homes and businesses aren’t being placed in areas where they’re likely to be damaged whenever a major weather event occurs.
“We understand the desire to keep rates affordable for consumers,” she said. “But the issue is that flooding is so destructive and it’s very dangerous to live in flood-prone areas.”