The federal government’s national flood insurance program is set to expire at the end of this month, leaving thousands of home buyers without access to affordable coverage — unless Congress renews the program.
Failure to come up with a long-term extension of the National Flood Insurance Program would disrupt the real estate market, NATIONAL ASSOCIATION OF REALTORS® President Moe Veissi told a Congressional panel May 9, 2012.
Renewing the program would give the housing market the certainty it needs as it recovers, Veissi told the Senate Banking Subcommittee on Economic Policy.
“We urge Congress to act quickly to reauthorize the NFIP and not let this vital program lapse again,” Veissi said. “It’s critical that home owners continue to have access to available and affordable flood insurance to protect themselves against losses.”
For some time now, Congress has been approving short-term extensions of the program while debate continues over comprehensive reforms to the program. Since 2008, there have been 17 short-term extensions, and twice authority has been allowed to expire, delaying or canceling 1,300 real estate transactions each day, according to NAR research.
During a June 2010 lapse, more than 40,000 home sales were stalled, NAR data shows.
The short-term extensions and shutdowns have exacerbated uncertainty in real estate markets and inhibited long-term investments that are vital to the U.S. economic recovery, said Veissi.
“Real estate markets are continuing to recover and can’t tolerate the instability of operating the NFIP by stopgap or shut down. This isn’t a responsible way to run the program, especially since 5.6 million home and business owners in 21,000 communities rely on it,” he said.
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In the past two decades, flood disasters have occurred in every state, brought on by melting snow, severe rain storms, hurricanes, or rising water along lakes, rivers, levees, and dams. Over the past year alone, disasters were declared in more than half the country, including the Dakotas, Iowa, Kansas, Missouri, Nebraska, Ohio, and Utah.
Because floods are unpredictable and cause expensive damage, affordable, full coverage has never been available from the private flood insurance market. The four largest insurers that write virtually all private flood policies aren’t an option for most home owners, except for the highest net-worth owners or highest value properties. Private policies cost, on average, twice as much as NFIP policies.
Without the NFIP, the only way for owners to rebuild their homes after a devastating flood is for the federal government to provide expensive post-disaster rebuilding assistance using taxpayer dollars.