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Rich towns pay less for flood coverage, study finds

UMass report says reasons are unclear; wealthier towns may have more defenses

Waves slammed into a seawall in Scituate in October 2012.David L. Ryan/Globe Staff/Globe Staff

In Edgartown on Martha’s Vineyard, where stately homes and oceanfront retreats have lured sea captains, celebrities and even vacationing presidents, homeowners pay an average of about $1,400 annually in flood insurance premiums, less than many other coastal Massachusetts communities.

Yet, in Fairhaven, a blue collar community that shares its harbor with New Bedford, the owners of more modest homes pay an average of nearly $1,800 a year, nearly one-third more than the rich and famous on the Vineyard.

Across Massachusetts, wealthier communities, with higher-value properties, in general pay hundreds of dollars less in premiums than their lower income neighbors under the National Flood Insurance Program, designed to provide coverage to waterfront homes and businesses, according to a study to be released Wednesday by the University of Massachusetts Dartmouth.


The reasons for the disparity in costs aren’t entirely clear, said Chad McGuire, the study’s author and a public policy professor at UMass Dartmouth. It may be that wealthier communities have more out-of-pocket resources, so individual homeowners can spend tens of thousands to elevate their homes on stilts and move their properties further away from the water’s reach, thereby reducing their premiums.

Local governments, supported by a tax base of multimillion-dollar homes, are probably more able to build seawalls, set aside open space land, and otherwise invest in reducing the risks of flooding, thereby helping their homeowners qualify for federal insurance discounts. But these factors don’t explain all the disparities.

Fairhaven residents, for example, pay an average premium per $100,000 in property value of about $820, more than double the nearly $400 that Edgartown residents, according to the UMass analysis. Both are coastal communities, so it’s unlikely the risks in Fairhaven are twice those in Edgartown.

In Fairhaven, Anne Kakley, 36, her husband, are paying $5,000 year for flood insurance, which has made it nearly impossible to the sell their home of 10 years and move into a bigger house with their growing family. “It makes it unsellable," Kakley said of her flood insurance bill. “You’re just stuck.”


Federal flood insurance, which is subsidized by taxpayers, disproportionately favors the owners of more expensive property on Martha’s Vineyard and Nantucket and along the South Shore in well-to-do communities such as Scituate, said McGuire. Since the insurance costs are low relative the value of the property, it encourages people to build in some of the most hazardous areas, even as rising sea levels increase the risk of flooding.

“It gives the greatest subsidy to the most expensive properties,” McGuire said. “There may be a lot of reasons for it, but the effect is still the same.”

The study looked at flood insurance premiums paid by Massachusetts communities and the value of the property being covered by the federal program in 2014. It did not explore issues, such as the history of flooding in these communities.

The federal flood insurance program covers homeowners in flood-prone areas because private insurers won’t due to the cost. The flood coverage is on top of traditional homeowners insurance and is required by banks for mortgages on homes in floodplains, whether they sit near the ocean or along rivers. In Massachusetts, about 60,000 properties in more than 330 cities and towns are covered by federal flood insurance.

But insurance costs vary among communities depending on the risks to properties and include a number of factors, such as the location and the greater likelihood of a home flooding or whether it’s elevated on stilts, said Rafael Lemaitre, a spokesman for Federal Emergency Management Agency, which administers the flood insurance program. The agency is reviewing the UMass Dartmouth study, Lemaitre said.


US Representative William Keating, a Bourne Democrat, questioned the findings of the study because it doesn’t take into consideration all the factors that go into setting insurance costs and wants to see further information.

“I don’t believe the conclusions in this paper are supported by the facts given,” Keating said in a statement. “But this is an important issue, and I am interested to hear the opinions of the scientists, experts, and insurance professionals in our district who have been working on this issue for years.”

The cost gap between towns may have less to do with the value of the properties, than how old they are, said Joe Rossi, the chairman of the Marshfield Citizens Coastal Coalition, a citizens group that works on local issues such as flood insurance.

Many coastal homes were built before the flood maps were set in the 1970s. Under the federal insurance program, the rates for these older homes are lessthan newer properties, and those lower costs are subsidized by those who pay higher premiums for federal flood insurance.

In wealthy communities, a large number of big, but old homes may lower the average premiums. In New England, about 55 percent of the homes pre-date the flood maps, Rossi said.


After the federal flood insurance program fell $24 billion in debt, triggered by the large payouts that followed Hurricane Katrina in 2005 and Hurricane Sandy in 2012, Congress tried to reduce the taxpayer subsidy and increase the insurance costs to these older homes. But an outcry from homeowners who saw premiums climb by thousands of dollars in a matter of a few years, forced lawmakers to scale back subsidy cuts.

Deirdre Fernandes can be reached at deirdre.fernandes@globe.com. Follow her on Twitter @fernandesglobe.