It’s no secret that Americans are willing to pay a premium for property on the beach. They could soon be paying hefty insurance premiums to live there as well.
Starting Oct. 1, the federal government plans to start gradually reducing subsidies for its flood insurance programs, pushing up rates for homeowners, according to the New York Times.
For the first time, the government will also take into account a home’s size, which means the owners of large beachfront properties are in for even larger rate hikes.
Federal officials say the changes are meant to emphasize the true risk homeowners face in flood-prone areas and to potentially encourage them to move to less vulnerable areas.
Benjamin Keys, a professor at the University of Pennsylvania’s Wharton School, said that the slashing of subsidies is likely to impact residential development and home prices.
“Subsidized insurance has been critical for supporting coastal real estate markets,” Keys said. “It’s going to require a major rethink about coastal living.”
The rate hikes will be phased in over several years. Hurricane- and flood-prone Florida may see some of the most drastic hikes.
Insurance agent Jake Holehouse said one of his Tampa-area clients currently pays $480 per year for flood insurance. Her rate under the new system could soar as high as $7,147 per year.
California is dealing with its own climate change-related insurance debacle. Private insurers have started to pull coverage from areas prone to wildfires, prompting the state to bar them from doing so.
[NYT] — Dennis Lynch