Coastal flooding, wildfires, and extreme weather events are posing an increasing risk to real estate. Last week’s Hurricane Harvey will likely go down as one of the costliest hurricanes in U.S. history with projections, so far, coming in at $10 billion to $20 billion in damages. Texas homeowners are left picking up the pieces from record levels of flooding.
The threats of weather-related disasters continues to grow. Freddie Mac’s chief economist last year wrote that an increase in coastal flooding and storm surges will eventually worsen to the point that homeowners, unable to sell flooded properties, will abandon their homes and mortgages. That could trigger a housing crisis, he wrote.
The government has spent $357 billion on disaster recovery in the last 10 years, according to Insurance Journal. The second highest payout on record was in 2016.
The home insurance market is seeing costs rise, and it’s projected to get worse. Over the next 15 years, the U.S. could see higher sea levels and storm surges that could increase the annual cost of coastal storms along the Eastern Seaboard and Gulf of Mexico by up to $35 billion, according to a 2014 analysis by Risky Business.
Flooding poses the biggest threats as the costliest type of natural disaster in the U.S. The National Flood Insurance Program was created to help alleviate the expenses from private insurers, but now the NFIP faces a looming expiration date.
The NFIP has a Sept. 30 deadline for Congress’ reauthorization. The NFIP helps to pay for and provide policies for millions of properties in at-risk flood areas across the country. The program is currently $24.6 billion in debt.
If Congress lets the NFIP lapse, the Federal Emergency Management Agency won’t be allowed to sell or renew flood insurance policies, pay existing claims, or start any mapping or management activities to create accurate assessments of risk, Curbed.com reports.
Carlos Gutierrez, a real estate pro with Florida’s Gutierrez Group in Miami Beach, says the NFIP program is “a key part of the equation in Florida real estate,” as well as in other coastal regions and areas at risk of flooding. Ninety-three percent of the buildings in Miami Beach are located in a Special Flood Hazard Area, which means they are required to have flood insurance for federally backed mortgages.
“We’re depending on the NFIP program,” Gutierrez told Curbed.com. “It could really hurt our industry if it isn’t renewed, and could cause thousands of home sales not to happen.”
Source: “How Extreme Weather Risk Is Creating a Real Estate Insurance Disaster,” Curbed.com (Aug. 29, 2017)
