Surging cost of flood insurance chills home sales in Red River Valley - Bring Me The News

Surging cost of flood insurance chills home sales in Red River Valley

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As federal subsidies for a national flood insurance program drift away, the rising cost of that insurance is putting a chill on home sales in many river towns.

The Associated Press reports that Roseau is the Minnesota city hardest hit by the changes to the National Flood Insurance Program. Nearly the entire town of 2,600 lies within the flood plain of the Roseau River. One mortgage consultant tells the AP the real estate market in the town is at a standstill. Flood insurance is required for most of Roseau's homes.

The spike in insurance costs is happening around the country as Congress ends the expensive practice of subsidizing premiums for older homes and businesses that were built before many modern restrictions on flood plain construction took effect.

An Associated Press story that looks at the national picture says some homeowners were looking at paying up to 15 times more for their insurance until President Obama signed a law Friday capping the increase at 18 percent a year. Businesses or second homes that occupy a flood plain could still face a 25 percent annual increase until premiums are in line with the full cost of insurance.

USA Today reported in January that the legislation to cap the increase was muscled through the Senate after angry constituents inundated Capitol Hill.

The AP says in Minnesota more than 2,500 homeowners are getting hit with an 18 percent increase. Nearly 10 percent of them are in Roseau. But a flood diversion program scheduled to take effect there next year will relieve most of those homeowners of the necessity of carrying insurance. Worthington, with 158 affected homes, is among cities where no relief is in sight.

The Federal Emergency Management Agency has background on the National Flood Insurance Program here.

After the program went bankrupt Congress enacted a package of reforms in 2012, including the end of the insurance subsidies. The law that President Obama signed Friday modified some of those changes. FEMA has a separate page on that.

In Wisconsin, La Crosse is one of the cities hit hardest by the insurance increases. La Crosse sits at the confluence of the La Crosse, Black, and Mississippi Rivers. One homeowner tells the AP she balked when her bank told her the flood insurance that cost her $575 last year would run nearly $3,700 this year. The new cap on the increase will soften that some, but the AP reports more than 500 La Crosse homes will see an 18 percent hike.

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