New federal flood insurance rules prompting concern in Elkhart County

Changes to national flood insurance policy will make it more expensive to get coverage for an unlucky few in Elkhart County.
Posted on Dec. 10, 2013 at 12:00 a.m.

ELKHART — Living alongside a river can be nice — some of the priciest homes here in Elkhart sit by the St. Joseph River and other waterways.

With new federal guidelines on provision of federal flood insurance, though, it's likely to get more expensive for some. Much more expensive.

Cory White, an Elkhart realtor, saw a home sale here fall through because the new would-be owner would have had to pay $4,000 to $6,000 per year in insurance due to the new rules, up significantly from the current cost of $625 to $850. “The buyer loved the house, absolutely wanted the house,” White said.

But when she learned of the new flood insurance cost — as the sale process was drawing to a close — she called the deal off. The current owner is now considering renting out the $75,000 riverfront house instead of selling, among other options, because if he keeps it, the cost of flood insurance would hold relatively steady.

“I had no clue that was going to happen,” said White. The relevant rule change went into effect Oct. 1.

The number of homes in Elkhart County potentially impacted by the flood insurance change, outlined in the Biggert-Waters Flood Insurance Reform Act of 2012, is relatively small. Just 301 properties here, 0.4 percent of the 77,767 housing units in the county, are covered by federally subsidized flood insurance, the pool subject to the new legislation, according to National Flood Insurance Program data.

Across Indiana, the number rises to 16,609.

Still, the impact to the owners of those properties — which include 215 primary residences in Elkhart County and 12,592 such homes across Indiana — could be big, mainly if they try to sell.

It's got the Indiana Association of Realtors and the National Association of Realtors calling for a timeout. The groups want a delay in implementation of rate increases brought on by Biggert-Waters pending completion of a study to more specifically gauge the financial impact of the legislation.

“It really is hitting Indiana in the gut at a time when our housing industry is starting to recover,” said Maggie McShane, senior vice president of governmental affairs for the Indiana Association of Realtors.

She has heard anecdotally of Indiana home sales falling through due to Biggert-Waters, as happened with White's client. Likewise, she said some policy holders have experienced larger-than-expected spikes in coverage costs, also per Biggert-Waters, even though they aren't selling.


If their property is mortgaged, owners of homes, businesses and other structures sitting in 1-percent chance floodplains are required to purchase federal flood insurance, provided through the Federal Emergency Management Agency, or FEMA.

One-percent floodplains are zones with a 1 percent chance any year of being flooded. Certain areas frequently hit by hurricanes on the East Coast sit in 1-percent floodplains, while in Elkhart County, such zones are located most notably in certain pockets along the St. Joseph and Elkhart rivers.

The Feds subsidize flood insurance, and Biggert-Waters aims to phase out the federal contribution, reducing spending and requiring policyholders to pitch in more or cover the cost entirely. Among other things, the new law:

Ÿ Makes those using mortgages to buy properties in 1-percent flood zones cover the cost of flood insurance entirely, the measure that would've affected the buyer in White's case. That provision went into effect Oct. 1.

Ÿ Calls for 25-percent increases per year as of Oct. 1 in flood insurance costs for business owners with subsidized premiums until the price tag reflects full risk rates.

Ÿ Calls for similar 25-percent per year hikes in flood insurance premiums as of last Jan. 1 on non-primary residences, like vacation homes, until reaching full risk rates.

White understands the rationale — to cut federal spending and make property owners foot the bill for living and building in flood-prone sectors.

Nonetheless, he also sympathizes with impacted property owners. Here in Elkhart County, the stricter rules could significantly reduce the value of what for many is their largest asset, their home, and make it next to impossible to sell, he worries.

If a buyer has other housing choices, “why bother” purchasing a property in a flood zone with the high-cost flood insurance, White said. Never mind that in the case of his client, the home hasn't flooded in the 12 years he's owned it.


An online Indiana Department of Natural Resources map depicts the 1-percent flood zones in Elkhart County and the rest of Indiana.

Among other areas, they sit in the DeCamp Gardens area north of C.R. 18 and west of C.R. 13, along either side of Jackson Boulevard around Elkhart Avenue, on either side of Sherman Street northwest of downtown Elkhart and south of Lexington Avenue around Socorro Street in Elkhart. A disclaimer, meanwhile, warns that certain elements of the map are subject to revision and shouldn't be used to determine if flood insurance is required.

David Henke, a member of the Elkhart City Council, owns three riverfront properties in Elkhart County and pays flood insurance on each, about $500 to $700 per year — for now.

His complaint isn't strictly about rising insurance costs, though. He thinks the flood risk is much greater in areas subject to hurricanes along the East Coast and that the very requirement of flood insurance in places like Indiana aims mainly to subsidize the cost of coverage in those areas.

“This is strictly to dilute the ... cost of the high-risk areas — Florida, North Carolina, all the coastal shores,” he said.

Whatever the case, insurance premium hikes are here or coming barring a delay in implementation of Biggert-Waters, and White, the real estate agent, thinks the clamoring could grow.

It won't be just from clients like his who lose out on the sales of their homes, though. As the gradual premium increases applicable to other property owners start showing up in bills yet to be received, it will come from others.

“I think when they start getting bills, you'll start hearing people get louder,” said White.

Follow reporter Tim Vandenack on Twitter at @timvandenack.

What types of properties fall into the category that could be affected by the change in Elkhart County?

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