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Rational Flood Insurance Needs Better Implementation

March 3, 2014

Published in the Wall Street Journal

You discount the economic hardship felt by homeowners everywhere: It isn't just wealthy beachfront vacation property owners and their Realtors who are affected by new flood-insurance rate increases.

A homeowner in Dayton, Ohio, who paid less than $1,000 a year for flood insurance, recently placed his house for sale and found a buyer at $79,000. The intended buyer was quoted $3,000 a year for the new flood insurance policy. At $250 a month, the seemingly "modest" increase would make the premium more than 50% of her mortgage payment. Not surprisingly, the house remains unsold.

Data from the National Association of Realtors show that nationwide about 40,000 home sales have already been disrupted because of the extreme premium increases.

Insurance subsidies for properties in historic flood plains need to be carefully reviewed and adjusted, but we need to make sure that the new maps are accurate and the new rates are properly calculated. And we need to fully understand the dramatic impact these increases have on property values and ownership sustainability.