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Habitat Magazine Business of Management 2021

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Schumer Puts Damper on New Flood-Insurance Rates

New York City

Flood insurance, FEMA, Chuck Schumer, co-ops and condos, Hurricane Sandy.

One goal of proposed flood-insurance rates is to bring premiums in line with levels of risk.

March 19, 2021

U.S. Sen. Chuck Schumer, the majority leader, has pushed the Federal Emergency Management Agency (FEMA) to hold off on releasing new rates for flood insurance – out of concern that rates would soar for owners of pricey homes in New York City and the southern shore of Long Island, The New York Times reports.

FEMA was preparing to announce new rates on April 1, part of an effort to discourage construction in high-risk areas and to bring  premiums in line with levels of risk. It’s part of the government’s larger effort, backed by the Biden administration, to prepare for climate threats. For New York City, with more residents living in high-risk flood zones than any other city in the country, higher insurance rates could be punishing.

“FEMA shouldn’t be rushing to overhaul their process and risk dramatically increasing premiums on middle-class and working-class families without first consulting with Congress and the communities at greatest risk to the effects of climate change,” a spokesman for Schumer said, adding that “Congress and the Biden administration must work together in a collaborative and transparent process” for “affordable protection” in communities nationwide.

Under the new approach, 23% of households with flood insurance would see their rates fall by an average of $86 a month, according to data provided by FEMA, because they have been overpaying based on their risk. Another 73% would see either no change or an increase of no more than $20 a month. Some of the remaining 4% of households would face the maximum of 18% annual increase for 10 years or more. As a result, their rates could increase at least fivefold over that time.

Those big rate increases would mostly apply to higher-cost homes – including those in the Hamptons – which, under the current formula, tend to underpay for insurance. Many of the people who would see a decrease live in lower-cost homes. In other words, the wealthiest homeowners would feel the sharpest sting under the FEMA plan, while the middle-class and working-class families cited by Schumer would actually benefit from the proposed rates.

When FEMA first announced the change in 2019, the new rates were supposed to take effect in October 2020. But the Trump administration pushed back the new rates until this year, worried in part that increasing premiums shortly before the election would hurt President Donald J. Trump politically. 

Opposition also came from members of Congress, including Schumer. After FEMA first said it would overhaul rates to reflect the full flood risk homeowners faced, Schumer held a news conference criticizing the plan. He asked: “How can we ram through a national flood insurance plan that could unfairly put a bull’s-eye on the backs of Long Island and New York homeowners without more consultation?”

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