Rising flood insurance rates bearing down like a hurricane on Florida

Call it a warning. Or maybe even a cry for help.

However you characterize it, the letter sent to the director of the Federal Emergency Management Agency makes it clear that a new flood insurance law will be a catastrophe in coastal communities.

The letter warns of insurance rates that are "unaffordable'' and will have "devastating impacts'' that will "force families out of their homes.''

Sound too alarmist to be taken seriously?

Then consider that the letter came from U.S. Rep. Maxine Waters, D-Calif., who was one of the lead sponsors of the Biggert-Waters Act passed 15 months ago. Waters now says the legislation had unintended consequences, and she's calling for a review.

The House has already passed an amendment to delay a portion of Biggert-Waters, and all eyes are now on the Senate. If senators fail to act, the impact on Tampa Bay could be enormous.

"To me, the best analogy is this thing is like a hurricane bearing down on us,'' said Treasure Island City Commissioner Tim Ramsberger. "It starts off as this storm on the coast of Africa that you're really not paying much attention to, and suddenly, it's on your doorstep. Well, this thing is on our doorstep. It's real, and it's dangerous.''

If you're not familiar with Biggert-Waters, this is the short explanation:

For decades, the federal government offered subsidized flood insurance in low-lying or coastal areas. In other words, the price paid was not equal to the risk involved.

When the National Flood Insurance Program found itself $18 billion in debt last year, Congress agreed to an overhaul, with new flood maps for high-risk areas and nonsubsidized rates.

"They were trying to make up 40 years' worth of losses in about five years,'' said insurance agent Jake Holehouse. "This is a national issue, but because of our density, Pinellas will be the most affected area in the nation.

"It could be catastrophic for our real estate market.''

Lawmakers failed to grasp the ramifications of raising flood insurance rates as rapidly as they proposed.

A typical high-risk home in Pinellas will see its premium go up 20 percent annually until it reaches an actuarially sound rate. So a waterfront home paying $2,000 for flood insurance will be paying nearly $5,000 in five years.

And those are the lucky ones. Anyone who purchases a high-risk home — or who has purchased a home since Biggert-Waters passed last summer — will immediately be subject to the maximum rates.

For instance, Holehouse bought a home on St. Pete Beach in December. His current flood insurance premium is $1,900 but was scheduled to balloon to more than $12,000 under Biggert-Waters. By increasing the deductible and dropping his content insurance, he was able to reduce his premium to $7,400 annually.

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The obvious danger is the potential impact on home sales and property values.

Jim White of Century 21 realty had a contract on a relatively modest $250,000 home in Redington Beach, but the buyer backed out when he realized his flood insurance would exceed $10,000.

The fear is that beach property values will fall, and homeowners could wind up upside down on mortgages and unable to afford insurance.

"These are people who bought small places with the idea they would retire on the beach,'' White said. "That's where it gets scary.''