There’s one more cost to absorb.
Changes to the way the federal government calculates premiums for new National Flood Insurance Program policies went into effect Oct. 1. Though the cost of premiums on Anna Maria Island will rise, Island Real Estate owner Larry Chatt does not expect the changes to significantly impact the island real estate market.
“I always try to approach extra expense with cautionary language but the overall expense and capital investment of a property on the island, versus the increase, is not significant,” Chatt said Oct. 1.
The NFIP was created in 1968 and is the primary provider of flood insurance in the United States.
Up to now, premiums were calculated based on 100-year flood zone maps and a property’s height in relation to the floodplain.
Under the new method, the cost of premiums is based on a property’s proximity to a flood source, the types of floods a property could experience, the cost to rebuild the property and other factors.
The NFIP is administered by the Federal Emergency Management Agency.
FEMA officials maintain the new calculation method is fairer to inland policyholders, which the agency says have been paying a disproportionate amount for NFIP insurance.
Insurance premiums on about 627,000 homes across the country will fall, while premiums on about 2.4 million homes will rise, according to The New York Times.
Some single-family homes on Anna Maria Island could experience first-year premium increases of up to $1,200 — among the highest price hikes in the country.
However, according to Chatt, the pricier policies will not move the needle for most island homeowners when the new calculations are applied to existing policies in April 2022.
Federal law prohibits FEMA from raising NFIP premiums on existing policies more than 18% on an annual basis.
While islanders on fixed incomes may feel the pinch in years to come, the majority of homeowners — who have seen their property values increase by about 20% in the past 18 months — will be able to foot the bill, Chatt said.
While the full force of the new calculation method applies to new policies, only about 70 of the approximately 9,000 residential properties on the island are up for sale.
Despite relatively higher premiums for new policies, Chatt is predicting prospective buyers will not be dissuaded from an island purchase.
“When you’re buying a house for $2 million and your flood insurance, instead of $7,000, is now $9,000, you’re not excited about it, but it’s not going to persuade you against purchasing the property,” he said.