With a flood map still in flux and flood insurance premium increases still not set, property owners in Manchester and Lakehurst may have too little information to make an informed decision on whether to rebuild their homes at a higher elevation, according to state officials and local insurance agents.
Record flooding from Superstorm Sandy on Oct. 29 caused billions of dollars worth of damage, and tens of thousdands of dollars in damage in Manchester and Lakehurst alone. In the aftermath of the storm, many owners are wondering if they will be required to elevate their homes.
This much is known: Emergency rules adopted by New Jersey on Jan. 24 require new and substantially reconstructed (where the cost of restoration equals or exceeds 50 percent of the market value of the structure before the damage occurred) buildings to be elevated in accordance with a temporary Advisory Base Flood Elevation (ABFE) map.
The rest of Manchester and Lakehurst's homeowners face a decision based on:
- Where their property falls on the new map: The Federal Emergency Management Agency (FEMA) released the advisory map last month. It recommends elevations at which a property can survive a 100-year storm with relatively minor damage. It also maps Velocity Zones (V Zones), where properties could sustain damage from storm waves of at least three feet on top of flood waters. Recommended elevations in V Zones are higher.
- Whether their flood-insurance premiums will increase dramatically: Shore property owners rely on the government's National Flood Insurance Program (NFIP), which has been billions of dollars in debt since Hurricane Katrina in 2005 and is subsidized by U.S. taxpayers. Legislation approved last year would eliminate taxpayer subsidies and make the program self-sustaining. That means potentially dramatic premium increases for the riskiest policy holders — owners whose properties fall below the base flood elevation on the new FEMA maps.
- How much it will cost to elevate a home: Estimates have varied wildly in the aftermath of the storm.
The problem for homeowners is that all the factors are still variable.
The "advisory" ABFE maps do not yet take into consideration mitigating factors such as dunes, bulkheads and buildings. Some properties could be moved out of V Zones when new versions of the advisory maps are released in late summer and early fall. Preliminary maps for Ocean County are due in the fall. At that point, property owners will have the option to appeal before a final version of the maps is approved.
Flood-insurance premium increases for most property owners have not yet taken effect either. FEMA has warned that the potential increases could be significant as the program moves toward a full actuarial basis, particularly for homes below base flood elevation.
But the only rate increases effective as of January 1, 2013, are for "pre-FIRM" construction (built before Dec. 31, 1974) for nonresident property owners (these increases are 25 percent).
More rate increases won't be effective until Aug. 1, when insurance premiums are likely to go up 25 percent annually for property owners until the flood-insurance program is self-sustaining. Properties far below base flood elevation could pay more than $30,000 annually, while properties that exceed the recommendations could pay less than $3,000.
"People are getting very upset over a lot of possibilities and a lot of unknown," said Michael McMahon of the McMahon Agency. "We believe a wait-and-see approach is prudent. Unless you are in the design process of a new home or are required to elevate your home due to substantial damage from Sandy, the ABFE maps have no bearing on you at this time."
McMahon said that if property owners are not forced to elevate because of the 50-percent rule, they could benefit from having more information before making the decision.
Read "FLOOD ELEVATION FAQs: New Jersey's Emergency Flood Elevation Rule" (or click on the attached PDF)
Anybody who holds a mortgage on a home in a flood zone is required to carry flood insurance. Buyers of properties in flood zones likely will have to pay the full actuarial flood-insurance rates and won't enjoy the same stepped 25-percent increases as existing policy holders when the changes become effective in August 2013.
"If your property was not substantially damaged, you do not need to take any action now," the state Department of Environmental Protection writes in a FAQ document (see links above) released this week.
"FEMA anticipates some changes to these maps (the ABFE flood maps) for both elevations and zones," the DEP writes. "The ABFEs currently reflect the most accurate modeling, topographic maps and scientific data available. FEMA plans to release updated flood maps over the next six to seven months, which will further fine-tune coastal flood elevations. The regulatory process to finalize the maps could take up to two years."
"Your rates could increase when FEMA adopts its final flood maps," the DEP writes. "If you do not meet its elevation standards, which are likely to be close to the ABFES, your rates could increase even more significantly."
The FAQ from the DEP also echoes what Gov. Chris Christie has been announcing this week — that the state will work to facilitate grants to help provide additional funding for homeowners to elevate their homes:
"FEMA can provide up to $30,000 to cover the Increased Cost of Compliance (ICC) with federal, state and local regulations if you have federal flood insurance. In addition, the Christie Administration intends to provide grants to homeowners with substantially damaged homes to help them offset some of the costs of elevation, mitigation and renovation, and intends to announce in the spring the mechanism for such grants. In order to access any additional funding, FEMA requires property owners reconstruct using the best available data."
The state says that even if homes are substantially damaged (requiring elevation), homeowners can live in the structures for up to four years if they take temporary measures to make homes habitable pending elevation.