City officials are worried that rising federal flood insurance costs for home and business owners will pummel the local real estate market and property tax revenue.
“There is a looming flood insurance crisis that is about to hit us,” Vice Mayor Marvin Shavlan told the City Commission this month.
Evidence of that crisis is already apparent as real estate sales fall through when buyers discover that their flood insurance bills could be as high as $24,000 a year, Shavlan said.
“It will significantly slow down the real estate market. People are scared to buy older homes,” agreed Jake Holehouse, an agent at Holehouse Insurance in St. Petersburg and a longtime St. Pete Beach resident.
“We are all very concerned about the outcome,” said Doug Swain, an agent at Re/Max Preferred in St. Pete Beach. Another agent lost a big sale this month because of the flood insurance rate increase, he said.
Congress, reacting to the extensive damage caused by Hurricane Sandy, changed the rules for flood insurance in July 2012 with the goal of collecting enough premiums to cover claims made under the federal program.
As a result, insurance rates are expected to sharply escalate beginning in October to rates that in many cases could be significantly higher than home mortgages.
Many homes in St. Pete Beach are below base flood elevation.
And anyone who purchased such a home after July 2012, absentee homeowners who live elsewhere 80 percent of the time, and any homeowners whose flood insurance policies lapsed or were canceled will feel the effect first, Holehouse said.
He cited an example. A home built in 1960 and 7 feet below base flood elevation was valued at $148,000 when it was purchased in March but will have an annual flood insurance premium of $22,400.
Similarly, Holehouse said, the new owner of a 1956 home 8 feet below flood level is now paying $1,960 but will have to pay $29,100 after Oct. 1.