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Congress nears restrictions on coastal flood insurance

The summer bungalow with a great view of the beach may lose federal flood insurance under a bill winding through Congress. The government is trying to tighten up the federal flood insurance program by restricting coverage for real estate development deemed too close to oceanfront or the Great Lakes.

The nation's real estate lobby fears the bill will harm property values and owners. Lack of flood insurance complicates a homeowner's ability to finance improvements or construction on coastal property.

Environmental groups, on the other hand, support the measure, arguing it would help protect ecologically fragile property.

"Unwise development practices continue to jeopardize public safety, severely damage environmentally sensitive areas and put a potentially overwhelming burden on the American taxpayer," states a letter signed by 10 environmental groups that support the bill.

Development in coastal floodplains has increased 40 percent since the passage of the National Flood Insurance Act of 1968, said Kathie Dickson, coastal projects organizer for the National Wildlife Federation in Washington, D.C.

"Flood-prone areas are some of the most biologically productive and yet ecologically fragile areas that we have," she said.

The bill would affect large structures, such as hotels and condominiums, that face the threat of erosion within the next 60 years along the seashore or shore of the Great Lakes. Also affected will be single-family homes that face the threat of erosion within the next 30 years. These erosion zones would be mapped after passage of the bill.

"We definitely believe it will devalue coastal property, particularly for those that fall in the setback areas," said Steven D. Driesler, chief lobbyist for the National Association of Realtors.

There's no firm estimate available on the total amount of property affected by the bill, which has passed the House and is pending before the Senate banking committee. Many states already have defined erosion-prone areas within their boundaries.

"There is a tremendous amount of property value at stake," said Christophe Tulou, staff member for the House Economic Stabilization subcommittee.

But Dickson of the National Wildlife Federation said an erosion zone "sounds like a lot more than what it really is." The zones are calculated on a region's historical average rate of erosion. For a community that sees the seafront crumble away an average of two feet per year, a 60-year erosion zone would encompass 120 feet, she said.

If the bill becomes law, no federal flood insurance would be available for substantial property improvements or new construction on seafront property within the 60-year erosion zones.

If homeowners elect not to relocate their homes, they would be eligible for one more federal insurance claim, covering 40 percent of property value.

While the Realtors association took no position on the bill, Driesler said their primary worry was property owners would receive no compensation for the loss of the use of their land. In such cases that could result "being a taking of property without full compensation as required by the Constitution," he said.