Earlier this week, the U.S. Senate passed a bill to extend the National Flood Insurance Program (NFIP) through November. The program is the only option for many homeowners who live in areas threatened by flooding during hurricane season. It has come under attack for charging premiums much lower than the actual risks posed to the properties. Critics of the program say the taxpayer money currently subsidizing the low rates could instead go to mitigating the effects of flooding in risk-prone areas.
A Call for Reform
Most industry professionals agree the extension was a good plan, but many worry another catastrophic event like Hurricane Harvey could decimate the program. However, a suspension of the flood insurance program would certainly have delayed or canceled closings in many areas of the country. Flood insurance is required for properties in flood-prone areas and most private insurers will not cover the damage.
“We applaud lawmakers for taking this needed action to prevent disruptions to closings in thousands of communities across the country,” National Association of Realtors (NAR) president Elizabeth Mendenhall said in response to the legislative activity. She added, “Although the program is now extended through November 30, the NFIP is in desperate need of reforms that will make the program solvent and sustainable for the long term.”
Real Costs are Skyrocketing
According to FEMA, last year about 95,000 NFIP policyholders submitted claims in the amount of $8.7 billion. The Union of Concerned Scientists (UCS) recently noted hundreds of thousands of U.S. homes are at risk for flooding. They also noted, “chronic inundations,” from rising sea levels or changes in terrain that may increase the likelihood of flooding.