Florida’s version of the American dream, which holds that even people of relatively modest means can aspire to live near the water, depends on a few crucial components: sugar white beaches, soft ocean breezes and federal flood insurance that is heavily subsidized.
While the program also covers homes around the country, the pain will be most acutely felt in coastal communities. For the first time, the new rates will also take into account the size of a home, so that large houses by the ocean could see an especially big jump in rates.
But starting Oct. 1, communities in Florida and elsewhere around the country will see those subsidies begin to disappear in a nationwide experiment in trying to adapt to climate change: Forcing Americans to pay something closer to the real cost of their flood risk, which is rising as the planet warms.
“Subsidized insurance has been critical for supporting coastal real estate markets,” said Benjamin Keys, a professor at the University of Pennsylvania’s Wharton School. Removing that subsidy, he said, is likely to affect where Americans build houses and how much people will pay for them. “It’s going to require a major rethink about coastal living.”
Federal officials say the goal is fairness — and also getting homeowners to understand the extent of the risk they face, and perhaps move to safer ground, reducing the human and financial toll of disasters.
The Biden administration’s new approach threatens home values, perhaps nowhere as intensely as Florida, a state particularly exposed to rising seas and worsening hurricanes. In some parts of the state, the cost of flood insurance will eventually increase tenfold, according to data obtained by The New York Times.
For example, Jennifer Zales, a real estate agent who lives in Tampa, pays $480 a year for flood insurance. Under the new system, her rates will eventually reach $7,147, according to Jake Holehouse, her insurance agent.
And that is prompting lawmakers from both parties to line up to block the new rates, which will be phased in over several years. “We are extremely concerned about the administration’s decision to proceed,” Sen. Bob Menendez, D-N.J., and eight other senators from both parties, including Majority Leader Chuck Schumer, D-N.Y., wrote in a letter to Deanne Criswell, the Federal Emergency Management Agency administrator, on Wednesday.
‘Our new, wet reality’ Created by Congress in 1968, the National Flood Insurance Program is the primary provider of flood coverage, which often is not available from private insurers. The program is funded by premiums from policyholders but can borrow money from the federal treasury to cover claims.
The average annual premium is $739. Until now, FEMA, which runs the program, has priced flood insurance based largely on whether a home is located inside the so-called 100-year flood plain, land expected to flood during a major storm. But that distinction ignores threats like intense rainfall or a property’s proximity to the water. Many homeowners pay rates that understate their true risk.
Staggering costs But the financial consequences of that new reality will be staggering for some communities.
In 2019, FEMA said it would instead price flood insurance based on the particular risks facing each individual property, a change the agency called “Risk Rating 2.0.” After a delay by the Trump administration, the new system takes effect next month for people purchasing flood insurance. For existing customers, rates will rise starting in April. The result has been a program that subsidizes wealthier coastal residents at the expense of homeowners farther from the water, who are more often people of color or low-income. That masking of true costs has also increased demand for houses in high-risk areas. As climate change makes flooding worse, using public money to underwrite waterfront mansions has become increasingly hard to defend.