In Crumbling Foundation Crisis, Speaker Vows To Help Some Homeowners With a Tax on All
HARTFORD, CT — House leaders gave the crumbling foundation issue a boost Wednesday when they pledged to schedule a vote on a $10 fee for all Connecticut homeowners.
The concept of a surcharge on homeowners had already been defeated, but it was recently resurrected as an amendment to another bill this week.
“The $10 surcharge on insurance policies is something we are ready to move forward on,” House Speaker Joe Aresimowicz, D-Berlin, said Wednesday. “This will happen before we leave,” referring to the end of the current session on May 9.
Earlier this year, a bill aimed at making insurance companies cover the cost of crumbling concrete foundation was voted down in the Judiciary Committee.
That bill would have added a $20 fee on all Connecticut homeowners.
Aresimowicz said if the $10 bill passed it would be his desire to have a regulated body disburse the millions of dollars the surcharge raises to ensure it goes directly to the owners of homes with crumbling foundations. The state is in the process of setting up a captive insurance company to begin to handle claims from homeowners staring at six-figure bills to replace their foundations.
There are an estimated 40 towns in north central Connecticut impacted by the problem, which involves a mineral known as pyrrhotite. The mineral used in the concrete aggregate for these foundations is now causing them to crumble.
The insurance companies for homeowners who are experiencing the problem are refusing to cover the damage because it’s not a “sudden” collapse, but a deterioration over a period of time.
Gov. Dannel P. Malloy made a plea to the Federal Emergency Management Agency for help, claiming the problem was a “natural disaster” because the mineral was the cause of the deterioration. The Army Corps of Engineers has visited the state to assess some of the damage, but FEMA has not agreed to declare a natural disaster or offer federal assistance.
As of December 2016, only 567 homeowners had reported the issue to the Department of Consumer Protection. But the Office of Fiscal Analysis says that over the next 15 years affected municipalities could lose about $40 million to $80 million in revenue. That’s based on a $2,000 to $4,000 loss in property tax revenue per home.
It’s estimated that as many as 30,000 homes could be impacted, but there is no exact number and that makes the task for policy makers even more difficult.
Homeowners have been hesitant to come forward because the problem could mean their home is worthless and many don’t have the $150,000 to $200,000 it would take to replace the foundation. Repairing it is not an option.
The state Bond Commission approved $5 million in bonding in 2017 to help homeowners cover the cost of testing their homes. Under the program run by the Capitol Region Council of Governments, homeowners will be eligible for a 50-percent reimbursement — up to $2,000 — for the testing of two core samples within their home. Homeowners who have a visual inspection conducted by a licensed professional engineer will be eligible for a 100 percent reimbursement — up to $400.
The program will provide support for testing for applicants with homes built since 1983 and that are within a 20-mile radius of the J.J. Mottes Concrete Company in Stafford Springs.
The budget passed last year included $100 million in bonding over five years for homeowners, but that still isn’t expected to be enough to help.
Aresimowicz said he understands that asking people who live in other parts of the state to pay for the problem, when it isn’t impacting them, isn’t a popular position.
But, he added, “at another point it could be another part of the state” that needs assistance from the rest of Connecticut.
Rep. Tom Delnicki, R-South Windsor, said that while other issues such as the state budget crisis, casinos, and marijuana legalization have grabbed more headlines this session, the crumbling foundation problem is “boiling to the surface” and needs to be dealt with.
Rep. Kurt Vail, R-Stafford Springs, said he, too would support the insurance surcharge.
He agreed with Delnicki “that this issue hasn’t been at the forefront — it took a while to get there. But this is a Connecticut issue,” he insisted, not just an issue for the homeowners impacted.
Aresimowicz, Delnicki, Vail, and House Majority Leader Matt Ritter, D-Hartford, all said that the insurance surcharge is just one step that can help homeowners but not the last step.
The four said additional steps that could be taken include asking insurance companies and banks who hold mortgages on the properties to assist the homeowners. Additionally, they said, the municipalities where the homes are located should also be providing funding assistance if possible.
“I will vote for it (the insurance surcharge),” said Ritter, adding that it is important for the House to show the homeowners that “we’ve got your back.”
Aresimowicz added that there is also a financial impact that reaches far beyond the homeowners if the they don’t get any help.
“If folks just walk away from their homes that impacts the banks that hold the mortgages, the municipalities, the state,” Aresimowicz said.
But beyond the financial cost, Aresimowicz said there is also a moral reason state legislators need to step up.
“Folks aren’t sleeping at night,” Aresimowicz said.
While the issue hits towns largely represented by Republican lawmakers, House Minority Leader Themis Klarides said she has concerns about a $10 surcharge.
She said she believes they have an obligation to help these homeowners, but a “surcharge is dangerous and it’s a slippery slope.”
Eric George, the president for the Insurance Association of Connecticut, wrote legislative leaders earlier this week to warn against making the insurance companies the collection agency for these surcharges.
“The IAC and its members are very sympathetic to the plight of homeowners who are affected by the crumbling foundation problem, but this is simply not a homeowners’ insurance issue,” George wrote. “Traditional homeowners’ insurance covers sudden accidental losses. It is neither designed nor intended to cover slow deterioration or to serve as a warranty for construction materials and workmanship.”
He said that’s why they believe it’s unfair to increase costs for insurers and their customers in order to pay for the crumbling foundation problem.