JOHNSTOWN, Pa. — Cuts to federal flood insurance subsidies threaten to cause steep hikes in insurance bills for those buying property in FEMA-designated "high risk" areas, and the ripple effect is washing onto the main streets and blue-collar blocks of the nation's river cities and towns.
For places like Johnstown, Pa. – a river valley town known for three major floods, the most recent in 1977 – it could be "devastating," said Brett Insurance Agency President Jim Brett.
The unexpected added annual expense could make home ownership unaffordable for recent home buyers or prompt prospective buyers eyeing a new home or business to shy away from flood zone neighborhoods.
Longtime homeowners in flood zones wouldn’t see the rate changes, but it could make selling their homes "a nightmare" because buyers would be forced to pay the higher insurance rates, Brett said.
Lisa Broadwater opened her salon in downtown Johnstown in the months following the act's July 2012 passage, meaning her property falls under the new guidelines.
Her current $300 per year flood insurance cost is likely to jump to $679, she said.
"You think you have all of your monthly expenses into consideration and something like this happens," she said.
Brett said some early annual estimates are worse, jumping from a few hundred dollars to more than $1,000 per year.
Subsidy cuts through the Biggert-Waters Flood Insurance Reform Act just went into effect on Oct. 1, but premium rates don’t change until annual renewal notices arrive.
Brett said he wasn’t surprised Congress ushered in sweeping changes to the National Flood Insurance Program last year. Major East Coast disasters helped put the program $25 million in debt, partly because payouts in disaster areas were sometimes ballooned by inflated local market rates, the bill's supporters noted at the time of its passage.