Sunday, February 08, 2015
A Call to Cull - Waterfront Homes, That Is.
There's a name for many splendid waterfront homes in Massachusetts. They're called "severe repetitive loss" properties and critics are beginning to say enough is enough, tear'em down.
The owner of 48 Oceanside Drive had just repaired her $1 million vacation home from a devastating 2013 storm when the Atlantic came crashing through a giant picture window last month. The Jan. 26 blizzard marked at least the 10th time the house has been damaged in four decades — and probably the 10th time it will be rebuilt, in part with taxpayer dollars.
Scituate is the front line in New England’s expensive, losing battle against the sea. The coastal town, with few offshore barriers to curb a storm’s fury, accounts for nearly 40 percent of Massachusetts homes and businesses that are so flood-prone the federal government calls them “severe repetitive loss” properties.
Nearly all of these estimated 150 properties in the town of 18,000 have received at least four payments from the federal flood insurance program over the years, meaning federal taxpayers have helped foot some of the reconstruction bills. Though property owners pay for flood insurance, the program is in the red and relies on billions from the federal government to stay afloat.
And the flood risk is getting worse as sea levels gradually rise. For decades, Boston averaged one or two sea water floods per year, based on the city’s tide gauge, and three floods annually in the 2000s. This decade, Boston is averaging around nine days of flooding a year, according to the National Oceanic and Atmospheric Administration.
What to do, what to do? A lot of those homeowners are wealthy. They contribute money to political campaigns and they vote. I know, let's buy their houses for way more than their flood-prone actual value.
They've got powerful friends in Congress, powerful enough to resist reforming the federal flood insurance programme. There was a move afoot to raise premiums to cover outlays, to make it self-financing. After all, anything else would be pure socialism, in this case making the poor cover the repetitive losses of the rich.
Why the rearguard action in Congress? Because, put on a self-financing basis, the insurance premiums on many waterfront houses would jump to $15,000 a year or more. That eliminates a lot of potential buyers when it comes time to sell, if you can sell. And it makes mortgage lenders very, very nervous. So these rich folks stand to lose a ton of money in property value alone if their flood insurance isn't massively subsidized.
Sooner or later those flood insurance premiums will have to skyrocket so, accepting the inevitable, it's better to bail out now if you can get government to write you a generous cheque.
Your home may be nominally worth millions but, if it gets hammered by storm surge and sea level rise every few years that will only worsen with each passing decade, it's really worth close to nothing. That will never do.