The Flood Insurance Crisis and Martha's Vineyard

It's not just Martha's Vineyard that is in crisis over the changes taking place and their resulting affect on home and business owners, it's all of Cape Cod and up along the North Shore. Okay, to be exact it is practically the whole country that is in crisis.

It was a the Biggert-Waters Flood Insurance Reform Act of 2012 that floated in on the tail of some transportation bill and was not properly vetted that started this mess. 

It was when I went to a FEMA sponsored presentation last summer that I knew we were in real trouble. I walked into the Martha's Vineyard High School one sweltering July afternoon and there in a large room were tables with maps strewn around in heaps and about four or five representatives standing around apparently telling jokes and biding their time before they could leave and go back home.  There were quite a few people from local insurance companies there but only three of us from the real estate profession and one of them was there because I invited him to come along.  My take away from that so-called presentation and Q&A was that no one knew what the heck was going on. 

Among my colleagues it seemed like no one else was concerned, and when I spoke about my concerns the response was always something like, "Oh, don't be so negative -- I don't want to hear about it".   Well, they are hearing about it now and everyone wants to know what is going on -- not that anyone still really knows. 

As a Realtor®, my organization has been lobbying to make changes and we supported a bill promoted by a small group of Senators and known as the Menendez-Isakson Homeowner Flood Insurance Affordability Act.  Last Friday I tuned into CSPAN and waited anxiously as the Bill was about to be voted on in the Senate.  The supporters of the Bill were hoping to get at least 60 votes.  At a little after 5:30pm the voting began and when it was over 86 voted for it and 13 voted against.  It passed the first hurtle which would put off any flood insurance rate increases, primarily to a select group of people, and require more study and engineering before a formal plan could be implemented. 

Menendez-Isakson does basically three things that are important because it does not change all aspects of Biggert-Waters.  

1) All homes and businesses that are currently “grandfathered” are protected. These are properties that were built to code and later remapped into a higher risk area. 

2) All properties that purchased a new policy after July 6, 2012, before they were legally required to purchase insurance. 

3) All properties sold after July 6, 2012.  New homeowners and business owners will receive the same treatment as the previous owner unless they trigger another provision in Biggert-Waters such as Severe Repetitive Loss, non-primary residence, substantial damage, etc. 

This last part is where the bad news lies for Martha's Vineyard; non-primary second home residences are not protected from the changes outlined in Biggert-Waters. 

However, as our Congressman Bill Keating said in a recent interview on WCAI, “Many of these people will just walk away from their homes, and leave the lenders with an inventory at a time when they’re just trying to clear that inventory from the 2009 mortgage collapse.”I heard this from an off-Island broker months ago after she interviewed her insurance agent on the Cape. 

So as you can see this is a very serious problem and it is not going away. Scientists have predicted that sea level will continue to rise and that by the end of this century it will stand somewhere between two to seven feet higher than it is today.  For the meantime what is going away are buyers, people who wanted to live on the water but are now thinking Martha's Vineyard is much too fragile an environment. Many of them have decided to look elsewhere. 

One of the changes that I have observed since I was a boy is that beach houses are no longer simple camps that you sweep out; they are grand luxurious homes and anyone who was paying attention to the drama on Chappy last summer knows exactly what I am talking about.  The ocean has always been in control and living on the edge will always have its risks.