There are tremendous benefits to living in Florida, and we would never consider leaving. We know that extreme weather conditions are a constant risk, and that is something we accept. However, these extreme conditions are set to make life here more expensive.
The reason for this is federal programs aimed at increasing the price of insurance for residents of high risk areas. We have already seen that FEMA is hiking flood insurance prices in places like Florida. Now we are being warned about a so-called ‘hurricane tax’ that is set to drive up even private insurance premiums.
This is due to a clause in President Biden’s proposed tax plan that will see insurers taxed. According to Dr. Lars Powell, Director of the Alabama Center for Insurance Information and Research at the University of Alabama, Biden has proposed a 15 to 28% minimum global tax rate which will drive up costs for insurance companies.
While this does not target individuals, it is expected that the insurers will pass these costs on to customers. Dr. Powell warns that homeowners insurance coverage rates may increase by over a billion dollars in Florida. They are calling it a ‘hurricane tax’ because it will hit disaster-prone areas like Florida the hardest.
Biden’s tax plan is in its early phases and there is still potential for this hurricane tax to be eliminated. If, however, it goes through, it may impact Florida homeowners not just in their premiums but in home value as well.
Here’s why.
Florida’s Future
House prices have, for over a year, been skyrocketing in Florida. While this has been true of the United States as a whole, Florida houses have particularly gained. In the second quarter of 2021, Florida homes gained a collective 24% in value.
Plenty has been said about this trend and whether it will continue. There will always be those anticipating a major crash like that of the 2000s. However, the reasons a crash may be imminent are entirely different to when the housing bubble popped.
The simple reality is that climate change, no matter its source, is causing sea levels to rise. This is already impacting Florida, which is why we are seeing more natural disasters. For this reason, the government is eager for residents of the highest risk areas to move. The FEMA price hikes, which increase the flooding premiums exponentially for some Floridians, are at least in part due to this reasoning.
The problem is not just that people will be paying higher premiums, but that the threat of climate change is now front of mind. When trying to sell a house in a high risk area, the risk rating will be a flashing red warning sign to potential buyers. If the hurricane tax does come into effect, its influence in the cost of private insurance premiums could be yet another reminder that Florida is disaster-prone.
Choosing to face the future in Florida may no longer seem as appealing as it has for so long.
What should you do?
If you’re wondering whether now is a good time to cash in on your Boca Raton home, you are not alone. However, there is no reason to panic as of yet. As a homeowner in Boca Raton, you are aware of the risks. You are aware of what your home can take and are probably prepared for whatever the future brings.
The fact that you will be paying more for insurance is, in itself, not cause enough to leave this beautiful city. The potential decrease in home value, on the other hand, may bother you.
The problem with cashing in on your home now is that prices may continue to rise. Instead of saving yourself from a future crash, you could end up leaving yourself without a home in Boca Raton as you watch your former home’s value skyrocket. Rent increases could mean that the benefits of selling will be cancelled out.
For now, the best advice is to consider staying put. Rather than panic-selling your home, wait and watch the signs carefully unfold. Chances are that everything will work out perfectly fine.
Are these price hikes fair?
Whether or not you consider these price hikes fair probably depends on your political affiliation. There are those who will take understandable umbrage at the federal government intervening in the price of their insurance. There are others who will see this change as a reasonable and fair move. That, at least, is in regard to the FEMA flood insurance hikes.
The hurricane tax, however, is unlikely to get support from any Florida residents. It disenfranchises everyone except the insurance companies. We all lose out, regardless of our risk rating.
The good news is that tax watchdogs have brought attention to this hurricane tax. It will not pass easily now that it has so many eyes on it. If it does eventually go through, home insurance companies may choose to absorb some of the impact in order to keep customers.
The climate is having an impact on insurance prices for Florida residents. For some, the warning signs will be enough to convince them to find homes elsewhere. For those of us who love living here, however, it will take a lot more to get us to move.