MANCHESTER-BY-THE-SEA – Al Cohen and his wife were searching for a waterfront home when they came across a dream house with spectacular views of the ocean.
Before they could make an offer on the property, they learned the bank would require federal flood insurance for the 2,000-square-foot, two-story Victorian. Premiums would cost more than $8,000 a year - on top of monthly mortgage payments and real estate taxes. That’s because a large chunk of the property was located in a newly reconfigured, high-hazard flood zone.
“It was definitely a deal killer,” said Cohen, a 52-year-old advertising consultant who recently moved to the North Shore from Pennsylvania. “We’re looking at places a little further inland.”
Under legislation passed by Congress in 2012, the Federal Emergency Management Agency has been redrawing the nation’s flood-zone boundaries, many of which haven’t been updated since the 1970s, and phasing out decades-old insurance subsidies for owners of homes in high-risk areas. The move is aimed at shoring up the National Flood Insurance Program, which is nearly $24 billion in the red as a result of losses from Hurricane Sandy and other catastrophic storms, according to FEMA.
But the changes are driving up insurance rates for property owners who already have coverage — to as much as $60,000 a year, according to some state lawmakers — and forcing others to get insurance for the first time, even if their property hasn’t flooded.
Real estate agents say that puts a damper on sales in flood zones - along the coast and inland - as prospective buyers balk at high premiums.
“We’ve had deals go sour from Boston to the Berkshires as a result of this law,” said Peter Ruffini, president of the Massachusetts Association of Realtors. “If you’re in the middle of a transaction and you find out that the flood insurance is going to cost you something like $25,000 a year, that’s a major concern for most people.”