Stop the Madness of Congress’ Flood Insurance Déjà Vu

Congress is set to temporarily extend the National Flood Insurance Program instead of adopting a long-term resolution to this vital program.

UPDATE: As expected, Congress approved yet another short-term extension of the National Flood Insurance Program Thursday night, making this the 13th time since 2008 that Congress has failed to find a long-term solution for the program. President Obama is expected to sign the measure into law Friday. When legislators return from the Thanksgiving holiday break, they’ll hopefully put the program on solid ground by passing a 5-year extension.


If you’ve been following developments related to the National Flood Insurance Program (NFIP), you’re probably beginning to feel a lot like Bill Murray’s character in “Groundhog Day.” You keep waking up to another short-term extension of this vital program — rather than a long-term resolution.

The implications of Congress’ déjà vu behavior are serious for both the real estate market and the 5.6 million property owners in more than 21,000 communities, who rely on the NFIP to protect their homes. On Oct. 5, 2011, President Obama signed the 12th flood insurance extension since 2008. Although the continuing resolution prevented an immediate lapse in flood insurance coverage, the program is set to expire again on Nov. 18. 

A House bill called the Flood Insurance Reform Act, passed in July, would reauthorize the NFIP for five years (until 2016). But the program needs support from both houses of Congress to earn long-term authorization. And industry experts predict Senate bottlenecks will likely result in yet another quick-fix extension.   

“Sources say the reason action on legislation extending the program until Sept. 30, 2016, is unlikely [before Nov. 18, 2011,] is because senators on both sides of the aisle are demanding that the bill be used as an engine to deal with issues not related to the NFIP,” reports Property Casualty 360.

Should Congress fail to pass a long-term reauthorization of the NFIP by the end of this week, one of two things will happen: 1) Another short-term extension or 2) a lapse. 

The latter is the worse of the two scenarios. In the past three years, Congress has allowed the program to lapse several times. The impact of each lapse has had a crippling effect on the nation’s struggling housing market. Buyers in FEMA-designated areas are legally obligated to purchase flood insurance to qualify for a federally backed mortgage, so a lapse in the program would stunt home sales in those regions. According to NATIONAL ASSOCIATION OF REALTORS®’ survey data, 47,000 home sales were delayed or canceled when the program lapsed in June 2010.

Another extension, the lesser of two evils, would insert additional and unnecessary uncertainty into already shaky housing markets. (Later this week, Congress is expected to vote on a government spending bill that would extend the NFIP only until Dec. 16.)

If Congress is serious about recharging America’s housing market, it will pass a long-term reauthorization of the National Flood Insurance Program and redirect its attention to the long list of other issues plaguing the nation. The very definition of insanity is “doing the same thing over and over again while expecting different outcomes.” Twelve short-term extensions of NFIP in three years is nothing short of insane.  

Do you think that Congress will agree to a long-term extension?