FEMA, Homeowners Insurance, Citizens and
Waterfront homes, low lying areas of Florida
Keith Gordon | November 15, 2022
Florida has recently witnessed the loss of at least 6 major writers of homeowners insurance partly due to fraudulent roof
claims along with a string a windstorm insurance claims. Rising water, more severe storms, the cost of new construction or
the cost or rebuilding homes after these nature disasters has the market on edge.
Now with property loss estimates ranging in the $500,000 billion loss column due to hurricane Ivan Florida’s homeowners’ insurance costs may double from
their current levels but will remain 50% under what it would cost if FEMA’s subsidies weren’t there to bridge the deficiency.
My name is Keith Robert Gordon a real estate broker in Florida since 1984. A native Floridian living at the epicenter of Florida’s rising water spending seventeen years on Miami Beach (1987-2003) watching Biscayne Bay slowly creep into the streets of South Beach. I saw this happening around 1998. We are now some twenty years beyond that point when I was so alarmed. This is ongoing problem for the residence of South Beach and Miami Beach. The city and taxpayers just keep throwing money at it raising homes, building streets higher and adding height to seawalls. The real estate taxes in Miami have always been quite high.
When I was living in Miami, I saw was water literally coming through the streets on most high tides and certainly all King Tides quickly submerging the lowest lying areas. Miami’s Little Hatti is now a real estate hotspot because it’s at 11’ above sea level!
I now live in Kenwood, a popular and quite high spot in St. Petersburg, Florida reaching some forty feet above sea level. While I do not fear sea water pushing through the streets of Kenwood any time soon or other high spots in St. Petersburg, I do believe that many low-lying areas of the Gulf Beaches, downtown St. Pete, Tampa, and other flood prone areas will soon be experiencing what Miami did back in the late nineties.
While climate change seems impossible to stop at this late point in time there are some measures homeowners can take to get in front of the high cost of insurance and the risk of being canceled by their insurance provider.
Whether buying or selling a home, the cost of homeowners insurance has Floridians taking measures that can mitigate the risks of being dropped. One consideration is getting a new roof. If your roof is 14 years or older assuming it’s a shingle roof, consider replacing it. In Florida, most insurance underwriters require at least 5 years of useful life on a roof. This “5-year rule” is held by the real estate industry, home inspectors and insurance underwriters. At age fifteen a shingle roof in Florida is a hazard and therefore considered “dead.”
Why is a fifteen-year-old shingle roof considered dead or a Hazzard? It can be largely categorized as no longer structurally sound. Roof shingle do have structural integrity and is the first line of defense against wind. If the shingles, go it’s now up to the roof sheathing to keep the roof in place. If that is exposed the home is at risk of complete destruction. Hurricane Andrew was a classic example of this when it came through Homestead as a Cat 5.
Concrete or other hard materials roof products are viewed differently than shingle roofs. While 4 times the cost to replace it is not considered a dead roof at year fifteen. It all depends on the insurance carrier and the 4-point insurance inspector. The main consideration when analyzing a concrete roof is how sound is the underlayment and what was the method for installation.
The thinking behind reroofing now as opposed to waiting to sell the home is you will receive a lower insurance premium with a new roof and buyers would be more willing to pay a premium. As a side note buyers see no noticeable advantage or premium to value when buying a home that has a 4-year-old roof verse an 8-year-old roof. 10 is still rather young roof. Therefore, reroof sooner than later.
That said, all home buyers want a new or new-like roof. So, investing in a new roof might save on insurance costs down the road and fetch a higher sales price when you do put your home on the market. While you are battening down the hatches, consider inspecting the hurricane clips that connect the roof trusses to the exterior bond beam. These clips ensure high winds won’t rip the roof off. Another thought is to have a general contractor or engineer look at the bracing or racking of the roof. At times, adding stiffing wood to the roof trusses can prevent twisting of the roof and roof failure.
Another insurance consideration is tree trimming. High winds with rain-soaked branches can cause quite a disaster for those inside the home and cause higher insurance premiums. Most insurance underwriters will require a 4-point inspection before issuing a policy: roof, electrical, mechanical, and pluming.
I am sure all homeowners and renters in Florida want hurricane windows and doors for added protection, but they are quite expensive. The benefits to a homeowner are lower energy bills, crime prevention, better sound barrier and lower insurance costs. All these benefits should be considered before paying excessive insurance rates. Impact windows will likely prevent a window from being the source of failure during a storm event.
Another rather expensive consideration for waterfront homes is raising the seawall cap. The ideal maneuver is to raise the cap at least 18” and widen the cap to be more people friendly. The cost would range between $20,000 to $100,000 depending on the height, width of cap and length of property.
Rip rap is a good idea as well. Besides adding value and beauty the marine animals love the cracks and crevasses that rip rap provides. Stone crabs, Florida spiny lobster and all the little fish live there. Snook will be standing by as well for those not so careful critters. The biggest advantage though is it slows down the wave action that can damage the pool and other landscaping.
Is FEMA and Citizens a time-bomb for waterfront values?
Scientists are predicting sea level changes based the data they know. Knowledge is ever changing and when it comes to polar ice and the ozone’s effects on rising waters nothing could be more challenging to scientists to get right. NASA engineers solved a spaceships reentry to earth’s atmosphere from space using high level math but have failed to solve this new challenge. That is what concerns me most. A new article published in August 2022 using data from NASA and European satellite reveal just that. Scientists have changed their timeline about the speed at which sea levels will rise. I believe this trend will accelerate catching many by surprise exacerbating the impact low lying flood prone areas.
Will FEMA Subsidies get on the chopping block (again)?
Currently, the flood Insurance program serves 5 million people of which 20% receive FEMA subsidies. When private insurance companies fail Citizens fills the gap but at who’s expense?
FEMA is criticized for encouraging development in areas that are prone to flooding while other homeowners outside these areas are sharing the cost using their tax dollars to support possibly the wealthier homeowners living in coastal
areas. This is what Citizens does.
Homeowners that buy flood insurance pay about 2-4% of “value” annually as a premium. Flood insurance rates if not subsidized by FEMA would be closer to 10-12% of value. Possibly higher.
Another seemingly farfetched concern would be mortgage underwriters. At what point will they treat waterfront homes as the due high-risk mortgages? In 30 years, some low-lying homes may be inhabitable.
Biggert-Waters Flood Insurance Reform Act of 2012.
Biggert-Waters proposed a gradual 5-year increase in flood insurance rates until such time as rates find “market” levels without federal subsidies. The market instantly reacted, and rates started climbing until the National Association of Realtor’s lobby and others successfully stopped Biggert-Waters Flood Insurance Reform Act from advancing and replaced it with a new bill called “Flood Insurance Affordability Act of 2014” reversing the 2012 austerity bill — delaying the inevitable. I believe hurricane Ivan just changed the outlook for how homes are insured. Interestingly, from the early figures coming out of FEMA it seems 80% of the dwellings in greater Ft. Meyers were uninsured. If this is true, that would be eye opening. Does this mean insurance is a must have versus can’t afford? We also can’t afford to lose our lifesavings or our lives. Time to reevaluate everything.
ALL ARTICLES
FEMA, Homeowners Insurance, Citizens and Waterfront homes, low lying areas of
Florida
Keith Gordon | November 15, 2022
I get asked questions all the time from homeowners and friends about home values. Now that hurricane Ian has devastated parts of Naples, Bonita Springs, Estero, Ft. Myers Beach, Sanibel Island, and likely parts of Boca Grande has this
event changed anything about how buyers value waterfront and low-lying areas of the West Coast of
Florida?
How to Price a Home in a Post Pandemic – Post Bidding War – High Interest Rate Real Estate Market
Keith Gordon | November 15, 2022
Sellers are always looking for professional guidance regarding the best list price or where to lower a list price once listed in the MLS. What I have learned is home sellers do want honest straight-forward guidance from agents, but
often receive less than helpful answers. Being straight with sellers doesn’t means they will agree necessarily
either.
