Premiums are going up on nearly 14,000 federally subsidized flood insurance policies in Hawaii as Congress looks to get a federal program out of a $24 billion hole.
Legislation signed by President Barack Obama on Friday means homeowners won’t see premiums jump all at once, as scheduled under a 2012 overhaul.
But while the law was widely hailed as a victory for people who had seen their bills triple, quadruple or even increase 15-fold overnight, pocketbook pain for many has merely been delayed.
And as many as 1.1 million policyholders nationwide with subsidized government insurance will still be hit with steady rate increases.
The relief law calls for insurance rates for owner-occupied homes to increase by up to 18 percent annually, while businesses and second homes will see hikes of 25 percent a year.
On Oahu more than 8,000 policyholders face the hefty premium increases, primarily on Oahu’s North Shore. But for anyone who wants a coveted piece of oceanfront property, insurance is bound to be getting more expensive.
"I just had a conversation with a buyer who wanted to buy on the North Shore, and he was really worried about the increases," said Cathy Possedi, a Honolulu-based real estate agent with Hawaii Life Real Estate Brokers. "Eventually you’re going to pay for it."
Under the new law, someone with a Hawaii vacation home paying $1,200 per year now for flood insurance would be paying $3,600 in five years and over $11,000 in 10, until they drop their subsidy and pay a rate based on the real flooding risk.
"You can imagine what it must be like for a homeowner who’s owned their home for 10 years," said Ivy Costa, an insurance agent with Liberty Mutual.
Before the relief law was signed, a homeowner in Haleiwa was shocked to find out that his $1,200 annual insurance rate would rise to as much as $47,000 a year, Costa said. Another, in Kailua, was faced with a potential increase to $30,000 per year from $700.
Howls of protests about such immediate increases led to the relief law that put the brakes on the 2012 overhaul that was supposed to end costly government subsidies under the National Flood Insurance Program.
But many say even the adjusted premiums will soon be beyond their means, though the question remains, Will the government continue to subsidize insurance in places that are increasingly untenable as sea levels rise and storms become more severe?
Congress created the National Flood Insurance Program in the late 1960s, in part because private insurers had abandoned the market. Today, in most places, it is the only option for buying flood insurance, which is required for most mortgages on any property in a flood hazard zone.
About 5.5 million policies are in force today, about 20 percent of them subsidized.
The Associated Press analyzed records from the Federal Emergency Management Agency for roughly 18,500 communities where the government offers subsidized flood insurance.
The data show communities in every state where even a few years of price hikes could leave many affected owners unable to afford their properties. Hundreds of small river towns and coastal communities with significant numbers of structures in flood hazard zones are at risk.
FEMA’s records also show why there is pressure to raise rates. Some communities with a large proportion of subsidized properties have been tremendously costly for the flood program. But there are just as many places where those policy discounts have cost taxpayers almost nothing.
The reform law signed by the president rolls back portions of a 2012 overhaul that took away subsidies immediately for any property that changed hands or was remapped into a higher risk flood zone. Both groups will now be able to continue paying subsidized rates.
But at least 820,000 homeowners nationwide will still be hit with rate increases of up to 18 percent each year until the program is collecting enough revenue to cover a $24 billion shortfall created by a series of catastrophic storms.
Owners of another quarter-million businesses or second homes will see their rates rise 25 percent each year, until their premiums reach rates that match the true risk of flooding.
Hawaii is particularly vulnerable, and some of the most desirable oceanfront properties are at the highest risk of flooding.
In December the ocean chipped away multimillion-dollar homes that line Sunset Beach, taking a deck here and a bedroom there as its waves pounded away.
On Oahu, 22 percent of policyholders face premium increases, and on the Big Island, 36 percent of policyholders could see a hike.
"Some people just can’t afford to pay $20 grand in an insurance policy, so they’re going to sell their house," Possedi said. "And who’s going to buy it? … lt’s a negative chain reaction."
Cathy Bussewitz, Associated Press