Sharp increases in federal funded insurance rates are worrying many property owners and starting to hurt property values and housing sales. The rate increase is brought about by a 2012 law that aims to discourage development in risky areas.
"We just both fell in love with this house," said Richard Holmes of St. Albans, West Virginia.
Holmes purchased his home in the River Bend area of St. Albans in August. Now, however, because his home sits on a flood plain he's facing an insurance nightmare.
"When we first got the insurance it was $1,470 a year," he said. "I had to pay $11,000 more. So it's a little over $12,000 a year" now.
Holmes is one of hundreds of thousands of homeowners nationwide affected by the Biggert-Waters Flood Insurance Reform Act. Effective as of October 1st, the law removes previous federal-funded subsidies from properties in flood zones. Now, homeowners are seeing a dramatic spike in flood insurance.
"I am a coal miner and I can't afford this," said Holmes of his new $12,000 insurance rate. "Usually I don't worry about anything but this here has really got me worried. I mean, I don't want to lose my house."
The law was approved by Congress in July 2012 as part of a wide-ranging transportation bill. The Biggert-Waters Act was intended to regain control of an increasingly unsustainable National Flood Insurance Program by discouraging development in risky areas. It was passed after an onslaught of claims from Hurricane Katrina in 2005.
In the past, if flood maps were redrawn and a property's risk profile changed, the old insurance rates were grand fathered in. The new law ends that practice beginning late next year.
"The insurance on your house could go up 100 percent or more," said Chuck Grishaber, the flood plan manager for Kanawha County.
That's because the Biggert-Waters Act is set to expand. Older properties in flood zones will see incremental increases of 25 percent each year. Homeowners and business owners are shocked to be facing potential tenfold premium increases or, in some cases, significant losses to the value of their homes.
Grishaber says there are several ways to avoid the spike in flood insurance rates.
"The big thing is to get your first floor of living space out of the flood plain," he said. "The higher it's out of the flood plain, the lower the rate they will get."
In recent weeks, the hefty flood insurance rate increases has stoked alarm and uncertainty. Mississippi has sued the federal government to try and block the law and a bipartisan group of senators from Gulf Coast States are pressing for significant changes.