Flood insurance jumps, leaving many high and dry
Steep increases in federal flood insurance rates have homeowners in flood zones worried about the consequences.
According to the city, more than 6,000 property owners carry flood insurance in Indianapolis, including the majority of residents in Rocky Ripple, which sits along the White River in a 100-year-flood zone.
A new law, the Biggert-Waters Flood Insurance Reform Act, is phasing out the subsidies that have kept flood insurance rates artificially low. It's in response to several catastrophic events that have left the program billions in debt.
While the new law, which took effect on July 6th 2012, won't affect anyone who's had a policy before July 6, 2012, as long as they don't let their policies lapse, the worry is the new law will make it virtually impossible to sell homes in a flood zone.
That's because someone who buys a house in a flood plain will have to pay the market rate for flood insurance, which could be many times higher than it was with the subsidy. And if you buy in a flood plain, you have to have flood insurance to get a mortgage.
Aaron Rickleff has lived in Rocky Ripple at river's edge for five years.
"We just found out a typical house in Rocky Ripple that might sell for $90,000 would require $7,000 a year in flood insurance, so I don't think anyone in their right mind would pay that," he said.
While Rickleff said he especially worries about the older residents, "People who've spent their whole lives here, have their life savings in their house and now through no fault of their own, they can't sell it unless they have a cash buyer who chooses not to have flood insurance."
Robert Tomey, president of the Rocky Ripple Town Council for six years, called the change, "very much a shock. It will wipe out the community."
Tomey's house is paid off. He doesn't intend to move, but he knows he'll never recoup all the money he's invested in redoing his house.
Like Rickleff, he worries about the adverse effects, noting that even though Rocky Ripple is in a flood plain, "It's been 100 years since we had a FEMA claim in the neighborhood."
Worse yet, he says, no one knew about the new law.
"The law was quietly enacted, a lot of people had no idea it was coming out," said Tomey.
Those hit hardest are people who bought homes on or after July 6, 2012 under the assumption their flood insurance premiums would remain the same and not knowing that as of Oct. 1, the new rates would kick in. In fact, even though the law was in force in July 2012, the rates were not available until Oct. 1, so no one knew the full impact.
Tomey predicted, "People who bought a house last year will be upside down."
This week, Tomey and the current town president sent an alert to residents warning them about the change. It began, "Effective as of Oct. 1, 2013, it is likely a home can no longer be sold in Rocky Ripple."
It goes on to say, "If we don't get flood protection, we are both literally and figuratively sunk. If the floods don't get us, the flood insurance surely will."
Thursday afternoon Realtor Joe Shoemaker met with a client in Rocky Ripple to talk about trying to sell her house and the challenges she now faces.
Shoemaker predicted homes that don't sell "will go back to the bank, because ultimately the owners will not be able to support payment."
An investor recently on the verge of selling a one-story home in Rocky Ripple for $112,000 said the owner backed out after discovering she'd have to pay $7,000 a year in flood insurance, far more than her mortgage. He said he didn't blame her.
Shoemaker noted that "anyone living in or near a flood plain will be affected. Some not living in Rocky Ripple will say they shouldn't have bought in a flood plain. The fact is this tanks more than (Rocky Ripple) it effect the neighborhood next-door and the surrounding areas."
He also pointed out that the changes will also affect homes in many places including Warfleigh, even some homes in Williams Creek and Meridian-Kessler.
Businesses too, are effected including several in Broad Ripple, due to their proximity to the White River.
Under the law, business properties will see their flood premiums rise 25 percent a year until their premiums reach market rate.
The only thing anyone can do? Push Congress to change the law, which is exactly what Tomey and other residents in Rocky Ripple are urging residents to do.