Program primer

The National Flood Insurance Program was created by Congress in 1968. It is part of the Federal Emergency Management Agency

A maximum of $250,000 of coverage is available for single-family residential buildings and $250,000 per unit for residential condominiums. The limit for contents coverage on all residential buildings is $100,000, which is also available to renters.

Commercial structures can be insured to a limit of $500,000 for the building and $500,000 for contents. The maximum insurance limit may not exceed the insurable value of the property.

Source: FEMA

Michael Sally, who works in the real estate business, went on a road trip in May.

Reforms

What: The Biggert-Waters Flood Insurance Reform and Modernization Act of 2012 removes subsidies for second homes, rentals and businesses, as well as dwellings that have had repeated flood losses. Rates also can increase on primary residences if a property is sold or policy lapses.

Why: Helps the National Flood Insurance Program repay debts incurred from past natural disasters, including Hurricane Katrina.

Issue: Housing advocates are urging federal lawmakers to delay the reforms because of their impact on how much affected homeowners will have to pay. There’s legislation proposing a one-year halt making its way through Congress.

His destination: Washington, D.C.

The purpose: to hear first-hand how the Federal Emergency Management Agency intends to implement reforms to its flood insurance program.

Sally’s interest and concern centers on the prediction that monthly premiums will rise sharply for millions of property owners across the country, including many in the Lowcountry.

The broker-in-charge of the Charleston real estate firm Pathway Real Estate Group described some unease after hearing the plan.

“This will be a tremendous blow to our communities,” Sally said. “We have to press Congress to delay implementing this until we can see how to keep it affordable.”

He and others describe a double-whammy for homeowners who are already reeling from overall increases in property insurance premiums, which are a separate expense from the federal flood program.

“You’ve got to think about retired people and others on a fixed income. This will have a major impact on their monthly expenses,” said Andrew Muller, a property and liability insurance adviser at Neace Lukens.

Local real estate professionals aren’t alone in urging federal lawmakers to halt the massive reform to the debt-laden National Flood Insurance Program. Similar efforts are taking place throughout the nation.

Low-lying parts of South Carolina, Florida and other states could be hit hard by new government land surveys, which could trigger flood insurance premium increases so big that property owners in those areas might no longer be able to afford the coverage.

At issue are homeowners whose flood premiums historically have been “grandfathered” at lower rates if they followed the rules in place at the time they bought or built their home.

Under last year’s bipartisan overhaul, many of these people would face higher premiums when the new flood maps are issued next year.

The Senate Appropriations Committee approved a one-year delay on the rate increase as part of a $39 billion spending bill funding the Department of Homeland Security. The delay already has passed the House as part of its version of the spending bill, and now its fate is up to a future Senate vote.

U.S. Sens. Tim Scott and Lindsey Graham, both S.C. Republicans, could not be reached for comment. U.S. House members who voted in favor of the year delay include Rep. Jim Clyburn, D-S.C., and Rep. Mark Sanford, R-S.C.

Clyburn said there is a need to make the flood insurance self-sustainable, but “we have not addressed the affordability component for homeowners who could see their rates quadruple.”

“We need to delay the rate increases to give us time to find a more equitable solution,” he said.

Sanford echoed similar thoughts, asking for FEMA to provide more details.

“Everybody knows rates are going up, but I think it is important to explain for what reasons, and that’s a basic if you’re going to charge more,” he said.

The overhaul

The name of the overhaul is the Biggert-Waters Flood Insurance Reform and Modernization Act of 2012. It passed last year with sweeping bipartisan support.

The government’s flood insurance initiative has required more than $24 billion in bailouts since being established in 1968, with billions of dollars in additional costs from Superstorm Sandy still being tallied. Most of the losses came because of subsidized rates and losses from repeat claims on homes and businesses that get flooded every few years.

The federal program subsidizes rates for about 20 percent of the 5.6 million dwellings it insures, FEMA officials have said.

Subsidies are applied to “pre-firm” structures, describing those that predate the first flood insurance rate maps in the 1960s. The assistance was made available to help people afford coverage even though their dwellings weren’t constructed with flood protection in mind.

Some reforms are going ahead, such as requiring higher rates for second homes. In October, premiums on businesses in flood zones and homes that have been severely or repeatedly flooded will climb 25 percent a year until the rates represent the “true risk” of flooding. And subsidized rates will lapse when a home is sold or flooded repeatedly.

The delay would provide relief to people whose older homes were built to the flood code in previous years or decades ago but would be judged to be at greater risk under new flood maps. Higher rates on these grandfathered homeowners would otherwise start taking effect late next year, and some homeowners face multi-fold premium increases that could make their payments unaffordable.

Local lobbying

The Charleston Trident Association of Realtors is orchestrating efforts to understand the impact of rising flood rates on the region. That includes gathering survey information from its members and homeowners as it works with state and national counterparts to determine if the reform needs to be evaluated.

Ryan Castle, the association’s government affairs director, said there’s been limited feedback so far, largely because of uncertainty about the rate increases.

Owen Tyler, 2013 president of the association, said he expects an outpouring once rates start to hit property owners in the pocketbook.

“I expect when ‘assumable’ flood policies go away and rate increases start, our membership and anyone with a flood policy or needing a flood policy will have something a good bit more to say,” he said.

For now, the uncertainty has already grown some fears that the rate increases could stem the recovery in the local housing market.

Interest rates already are edging higher. If flood premiums jump, it could push potential buyers from the market, some coastal Realtors say.

“The biggest concern is the uncertainty,” said Andy Twisdale, a real estate agent on Hilton Head Island. “It seems like nobody has a handle on what the results will be.”

Sally said the uncertainty could have buyers halting a home purchase.

“Flood insurance has always been a factor when people look at purchasing a home, and now we have a scary unknown when we talk about the future of those rates,” he said.

Supporters of last year’s flood insurance changes say delaying the premium increases means people whose homes are at lower risk of being flooded will have to pay higher premiums to subsidize those living in flood zones.

“Delaying risk-based flood insurance rates doesn’t delay homeowners’ vulnerability or delay the insolvency of the program,” said Steve Ellis of Taxpayers for Common Sense, a Washington, D.C.-based watchdog group. “Lower-risk homeowners will see their rates increase disproportionately to offset the revenue lost from delayed rate increases on higher-risk properties.”

Reach Tyrone Richardson at 937-5550 and follow him on Twitter @tyrichardsonPC.

The Associated Press contributed to this story.