Flood insurance hikes could impact real estate market
If you haven't seen the new FEMA flood maps, you may want to take a look. Flood insurance rates are going through the roof in some cases, and one business owner is already feeling the full effect.
Mike Rongey was hoping to sell a warehouse that his family has owned for 40 years. "I wish the first thing everyone had done was to check the insurance, not go check the titles," Rongey said.
The sale fell through, thanks to new flood insurance requirements that could cause a new owner's insurance rates to soar 10 times higher than the old rate. "He really put his heart and soul into it, only to find in the eleventh hour, I can't insure it," said Rongey.
FEMA has put out both new flood maps and new policies designed to phase out federal subsidies that have cost taxpayers billions. The local economy could pay the price.
Ivan Meistovich, director of UNO's Center for Economic Development, said, "You've got an instant barrier for new businesses to come into this area, as they have to look at this as an added cost to be in New Orleans or the Gulf South area."
Owners of frequently flooded properties, business properties, and secondary homes in many cases may want to budget more for insurance.
"I think the west bank is vulnerable because it's outside the new levee system," said Meistovich.
And insurance agents worry about the uncertainty until the rates are "actuarially sound" without federal bailouts.
Tommy McMahon with Eustis Insurance told FOX 8, "All I know is what we're getting from FEMA. We think there will be a large pushback of flood insurance buyers in summer time, leading to the fourth quarter."
While the sale of some of these properties well inside levees is already being impacted, sales of properties outside those levee systems could be impacted even more. Portions of St. Tammany, Plaquemines, and St John Parishes are in for higher rates too.
But the news is not all bad. Local realtors are optimistic that thousands of people in the metro area, especially those inside new flood protection systems, could see rates stay flat or even go down, thanks to new lower base flood elevations.
"If you happen to be in an area that has had its ratings lowered because of improved flood protection, you can expect no change or a reduction," said Meistovich.
The rates will be determined on a number of factors, and it could impact your home or your business.
"You're going to have people who shouldn't be without flood insurance taking the risk, saying, 'I can't afford it,'" said Mike Rongey.
Rongey believes many will roll the dice and make that call. One local insurance company says most new homeowners in New Orleans and Metairie are still getting new policies based on the old rates. But clearly, the changes will impact many on a case-by-case basis.