MYRTLE BEACH — Grand Strand real estate executives cheered what appeared to be an attempt by Congress on Tuesday to slow down the steamroller of rate hikes to the federal flood insurance program, but they can’t be sure what will come of it.
“I agree the program needs revamping,” said Randy Harrison, broker/owner of Harrison Realty Co. in Surfside Beach, “but just not all at one time.”
A bipartisan group of lawmakers Tuesday unveiled legislation that would delay for about four years several changes to the federal government's flood insurance program that are threatening to sock thousands of people with unaffordable premium hikes.
The move comes as the government is beginning to implement a significant overhaul of the much-criticized program. That overhaul passed last year with sweeping support. The revamped program was backed by both liberals and tea party conservatives but has caused a panic in places like Staten Island, N.Y., and the New Jersey coast and in flood-prone areas of Louisiana, Mississippi and Florida, where higher rates threaten to push some people out of their homes.
The flood insurance program has long offered below-cost rates for homeowners in flood zones and has racked up about $25 billion in red ink since its creation in 1968.
It has been criticized for repeatedly paying off homeowners whose houses get flooded every few years. The flood insurance program collects $3.5 billion in premiums each year, but the Federal Emergency Management Agency, which runs it, says $1.5 billion more is required from subsidized policyholders to put it on sound financial footing as required by last year’s changes.
The revamped flood insurance program was approved by Congress to end the subsidies, but the reality is that the revamp is slowing down a sizeable chunk of the real estate market and threatens to hit at least some property owners with premiums they can’t afford.
To counter that, a bipartisan group of lawmakers unveiled legislation Tuesday that would delay changes to the program for about four years.
“This is a real threat to the economic well-being of many communities,” said Sen. Mary Landrieu, D-La., of the program revamp. “There is no state that is exempt from this challenge.”
Last year’s legislation promises premium increases to 1.1 million homeowners who’ve received subsidized, below-risk coverage, about 50,000 of whom own property along the Grand Strand. The changes proposed Tuesday would not affect an immediate rollout of higher rates on second homes and those that have had frequent flood damage, but that standard will fall as well, if Grand Strand Realtors have any say.
Laura Crowther, CEO of the Coastal Carolinas Association of Realtors, said Realtors statewide have appealed to their Congressional representatives to consider holding back on increases for second homes, which are a significant part of the Grand Strand and other South Carolina markets.
The proposed legislation to delay changes, she said, “will give us time to look at the current legislation to see how it needs to be tweaked or changed.”
Seventh District Congressman Tom Rice, R-Myrtle Beach, said he is interested to see the changes that were proposed Tuesday.
“I was proud to support the Cassidy Amendment earlier this year which would postpone some of the premium increases facing South Carolina homeowners,” he said in an email.
But conservative groups were against that rollback, and top House and Senate leaders have both been silent about it.
The new law will eventually cause property owners to pay the higher premium whose rates are now grandfathered under older building standards or were deemed at a lower risk under previous flood maps.
“They have followed the rules. They built to the right elevation when they built,” said Sen. David Vitter, R-La. “And yet, through no fault of their own they are facing not just rate increases to make the system solvent, but literally in some cases unaffordable rate increases that could throw them out of their homes.”
“It has dried up the real estate market,” Sen. Bill Nelson, D-Fla.
The situation is not that bad along the Grand Strand, Harrison said, adding that the Hilton Head Island and Charleston markets seem to have been hit harder. But he said he heard last week of buyers ready to close on a $750,000 home when they learned the flood insurance would be $14,000 a year rather than the $800 the sellers had been paying.
He and Crowther said that the Federal Emergency Management Agency was to have done an impact study on the new system by last April, but it has not yet been completed. It needs to be before any changes are finalized, they said.
“We’ve kind of got the cart before the horse,” Crowther said.
Sponsors of the bill included Democratic Sens. Bob Menendez of New Jersey and Landrieu, as well as Republican Sens. Johnny Isakson of Georgia and John Hoeven of North Dakota. Rep. Maxine Waters, D-Calif., who co-wrote last year’s legislation, is also on board.
It’s unclear whether the drive to delay implementation of the law will succeed. Backers of the delay won an impressive, bipartisan 281-146 House vote earlier this year on an amendment to a spending bill that would postpone some of the premium increases.
Sen. Charles Schumer, D-N.Y., a member of the Democratic leadership, predicted the problems in the flood program would be addressed relatively soon. Rep. Bill Cassidy, R-La., said he’s met with No. 2 House Republican Eric Cantor of Virginia and feels “maybe we can pull this together.” Cassidy said Cantor “did not commit, but he’s at least open to it, understanding that this is an issue affecting many middle-class families.”
Harrison said he has concerns besides the new rates. He wants to know how those rates are being set.
“Do the Congress and the insurance companies go out to dinner and come up with a rate?” he asked.
The Sun News’ Steve Jones and The Associated Press contributed to this story.