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Political rhetoric that subsidized flood insurance rates help rich doesn't mesh with reality

The spike in flood insurance rates targets rich owners of beachfront estates. So goes a pervasive talking point among politicians and advocacy groups that, so far, are fending off efforts in Congress to delay the rate increases.

Consider, for instance, the R Street Institute, a public policy think tank that cheered when Florida Sen. Bill Nelson and others were rebuffed last week from pushing through a four-year delay in the flood insurance overhaul. "The (subsidized) benefits being phased out flow disproportionately to wealthy homeowners," R Street maintained.

A recent editorial on the Wall Street Journal said the subsidized federal flood program has been "encouraging the affluent to build mansions near the shore."

Just one problem: The critics' premise isn't accurate, at least not in Tampa Bay.

As the Tampa Bay Times previously reported, most of the homes losing their lower, subsidized rates because of the Biggert-Waters Flood Insurance Reform Act of 2012 are modest dwellings built more than 30 years ago, not beachfront mansions:

• The median value of the 33,000 homes in Pinellas County hit by sharply higher rates is $132,245. The typical size: 1,430 square feet. Roughly two-thirds of the homes don't have water frontage or a water view, according to county property appraiser records.

• In Hillsborough, the median size of the roughly 20,000 homes targeted to lose their subsidized rates is 1,500 square feet, according to property appraiser data. The median assessed value is $102,867. And the vast majority of houses — more than 80 percent — are not on the water.

None of that has stopped advocates of the rate hike from repeatedly describing the flood insurance subsidies as a subsidy for the rich.

Pinellas Property Appraiser Pam Dubov has had her fill of the rhetoric, which she calls "pretty unconscionable," "insane" and "frustrating."

In recent months, Dubov has reiterated the same message at town hall meetings, news conferences and other gatherings: Her analysis, which is based on the age and flood elevation level of the affected properties, shows modest homes are affected the most.

"The truth is this flood insurance problem is affecting people with very modest incomes, and nobody can really prove otherwise," she said. "What's going on in Congress now is just not right."

FEMA, which operates the National Flood Insurance Program, breaks down the number of subsidized properties only to the county level, spokesman Dan Watson said. Watson could not give the average value of a subsidized home.

R Street said it bases its assertions on general countywide data, noting that 29 percent of the subsidized properties are in counties that rank in the top 10 percent nationwide of median household income. But its analysis does not take into account a wide disparity of home values in a given county.

A case in point is Pinellas County, which is hit hard with about 50,000 subsidized properties, more than any other county in the nation.

Robin Sollie, president of the Tampa Bay Beaches Chamber of Commerce, said many affected flood policyholders are mid-level homeowners; some are retirees who may have a higher-value home but are on a fixed income and can't afford higher rates.

In many cases, flood insurance rates are going up by about 20 percent annually. But in some instances, such as when a home was sold after July 2012, the subsidy is being eliminated immediately. As a result, some local homeowners have seen their flood insurance rates spiral from a few thousand dollars a year to well over $10,000.

"We're not (out) of the foreclosure crisis, and this will add fuel to the fire," Sollie said. "FEMA has heard from thousands of people with estimates that have tripled and quadrupled, yet they seem to have no sense of urgency."

Tampa-based Homeowners Choice Insurance, which was recently given regulatory approval to sell flood coverage to its policyholders, tried to ascertain how many of its current customers had qualified for flood subsidies.

It found a potential pool of 2,500 policies in Pinellas with an average value of $200,000 or less.

"These aren't wealthy people; they aren't millionaires," said Homeowners Choice CEO Paresh Patel. "We're talking about homes built in the '50s, '60s and '70s. You weren't building 4,000-square-foot homes then."

Jeff Harrington can be reached at jharring- ton@tampabay.com or (727) 893-8242.

Fast facts on flood insurance

FLORIDA GIVES WAY MORE THAN IT GETS: Since 1978, Floridians have paid four times more in flood insurance premiums than they've gotten back to cover losses. More than $16 billion in premiums compared to $3.7 billion in claims. By contrast, Louisiana property owners have paid about $4.5 billion in premiums while receiving more than $16 billion, due largely to Hurricanes Katrina and Rita in 2005. Louisiana, alone, has received more than 40 percent of flood claims paid out nationally since 1978.

THAT'S TRUE LOCALLY AS WELL: St. Petersburg homeowners, for instance, have been reimbursed just $55 million to cover losses but have paid around $480 million in premiums. The city's residents are paying $33.5 million in premiums this year alone.

FLORIDA HURRICANES AREN'T THE PROBLEM: Of the top 15 "significant flood events'' covered by the program since 1978, only one was for a hurricane that caused major flood damage in Florida (2004's Ivan). Historically, hurricanes that strike Florida cause more wind damage than flooding. That was true for Hurricane Andrew in 1992 and Charley, Jeanne and Frances in 2004, none of which placed in the top 15 flood events.

TAXPAYERS DON'T SUBSIDIZE FLOOD POLICIES IN FLORIDA: Or anywhere else for that matter. Not a dime of U.S. taxpayer money has been lost on claims, which have totaled about $50 billion nationwide since 1978. That could change if the U.S. Treasury Department "forgives'' the $24 billion the program currently owes but that appears unlikely.

Sources: FEMA, Congressional Research Service, National Flood Insurance Program Actuarial Rate Review, American Academy of Actuaries, flood insurance subcommittee; the Wharton Center at the University of Pennsylvania.

Political rhetoric that subsidized flood insurance rates help rich doesn't mesh with reality 12/13/13 [Last modified: Friday, December 13, 2013 8:01pm]
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