TV-6 Investigates: Flood Insurance Reform, Impact On Home Sales - News and Weather For The Quad Cities -

TV-6 Investigates: Flood Insurance Reform, Impact On Home Sales

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The flood insurance program is broken.

Busted by hurricanes causing billions of dollars in damages.

Congress created a fix by stripping away subsidized flood insurance for property built before flood maps existed.

Thursday, the Senate passed a proposal to alter the original fix which led to dramatic insurance price increases.

The bill is now headed to the House.

FEMA has paid out billions of dollars in flood insurance claims since the program was created back in the sixties.

The claims from Hurricane Katrina and Superstorm Sandy wiped out the flood insurance program though.

Putting taxpayers on the hook for $24 billion FEMA had to borrow.

Now property owners in flood plains feel reform will cost them thousands of dollars on their biggest investment, their homes.

"I won't ever be able to sell this house," says Barstow homeowner Eugene Frels. He says flood insurance reform will destroy his home's value. His grandfather built it in 1955, before flood plains were mapped and flood insurance existed. It qualified for a subsidized flood insurance policy, until Frels took out a mortgage on the property after the reform took effect.

"I will never see the money I'm paying to FEMA for damages," says Frels.

He's paying $1,800 now for flood insurance. That's up from $500. He even increased his deductible from $1,000 to $5,000 to try and limit his rate hike.

"Nobody's going to want to add $2,300 dollars a year to their liability," says Frels.

"It's already starting, it's starting in our community, it's all over the country," says QC Association of Realtors Executive Sharon Carlson.

Flood insurance reform takes the subsidies away and the prospect of un-subsidized flood insurance worries Carlson. She says the realtors supported flood insurance reform in the beginning. Now, they've changed their minds.

"The problem is with implementation and the removal of the subsidies," says Carlson.

For businesses, vacation homes, and repeat flooded properties, prices have already started increasing 25 percent each year until the insurance rate reflects the true flood risk. Homeowners with subsidies on their main homes will keep their subsidy until they go to sell. Then the new buyer pays the full price for flood insurance, right away.

"The seller either has to cut the price which eats the equity, or the house is not saleable at all, because it takes too many buyers out of the market," says Carlson.

Homeowners trying to sell their homes in Bettendorf, Davenport, and Moline tell TV 6 flood insurance prices have impacted their sales. One owner had a buyer walk away two days before closing. Carlson believes few people realize the position they will find themselves in.

"(I) don't think that buyers out there that are looking at property have any idea, when they're told they have to get flood insurance, realized what kind of bill they're going to have to pay," says Carlson.

There are nearly 1,500 homes in Scott and Rock Island counties that will be impacted by the flood insurance trigger. Flood plain managers though say the reforms are needed.

"I believe so and simply because FEMA has gone into the hole so far with the various disasters since Katrina, that something had to be done to help the taxpayers out," says Whiteside County Floodplain Manager E. Stuart Richter.

He says there has long been a debate over flood insurance. Should taxpayers cover the cost when insurance won't, or should these property owners pay the price of living in a flood plain?

"I can see helping people out to a point, and somewhere along the way they've got to assume their own risks and do something to protect themselves," says Richter.

FEMA statistics show the flood insurance program has been a mixed bag in Iowa and Illinois. Since 1978, FEMA has collected $526 million in premiums in Illinois. It's paid out $486 million in claims. FEMA collected $135 million in premiums in Iowa, but paid out $271 million in claims.

"People are either going to be able to pay the required premiums, or they won't and I don't know what happens if they drop out of flood insurance and pay any damage costs themselves," says Richter.

"We can't do it this way, we can't do it on the backs of homeowners," says Congressman Dave Loebsack.

He says the debt FEMA owes needs to be paid. Although he disagrees with paying it by stripping subsidized rates from property owners.

"Right now it just jacks up the prices very quickly and to be blunt, I think for no reason whatsoever," says Loebsack.

"If properties aren't able to sell, the median prices have to go down because of this, it's going to have a big impact on our community," says Carlson.

Frels puts the impact plainly.

"I don't know how they expect anybody to afford them."

A concern communities with these properties in them will begin to face house by house, neighborhood by neighborhood.

One of the reasons the Senate approved a bill delaying the insurance increases Thursday is to give FEMA time to study how the prices will affect property owners.

The original law required FEMA to do the study, but Congress did not approve enough funding for the study to be done.