Stop Dillydallying: Long-Term Flood Insurance Key to Housing Stability

Congress has extended the National Flood Insurance Program for the short term — now it’s time to find the right long-term solution.

Congress passed another short-term extension of the National Flood Insurance Program (NFIP) just hours before it was set to expire on Oct. 4, keeping the program running through Nov. 18. The vote thankfully prevented another NFIP lapse, which provided a sigh of relief for prospective home buyers — at least for a little while.

However, the vote did nothing to restore faith in the federal government’s ability to solve big problems or fix the housing market.

Now Congress has to shift its attention to passing a longer, 5-year extension of the NFIP with some much-needed reforms to ensure the fiscal continuity of this invaluable program for years to come.

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The House already passed a long-term NFIP extension (H.R. 1309, the “Flood Insurance Reform Act of 2011”) in July, but the bill has been stalled in the Senate after being marked up in the Banking Committee on Sept. 8. Even if the Senate passes its extension soon, the two houses will enter negotiations over some key differences.

Senate version

  • Extends NFIP through 2016.
  • Phases out over 4 years the subsidized premium rates paid by policyholders of properties built before 1974 or properties built after that but before the flood map for the area was implemented. (That’s less than 25% of the properties covered by NFIP.) Premiums on these subsidized policies are about 35% to 40% of their full risk level on average, says FEMA.
  • Allows NFIP to raise rates by up to 15% annually.

House version

  • Also extends NFIP through 2016, but …
  • Phases out the older-property subsidies over 5 rather than 4 years.
  • Allows for business interruption and additional living expenses coverage, whereas the Senate bill just adds a provision to study that additional coverage.

Leading industry experts are asking Congress to come through with a long-term solution to provide some solace for home owners. “We’ve been down this road before, watching as Congress gets to the home stretch only to falter before the finish line,” said Jimi Grande, senior vice president of federal and political affairs for the National Association of Mutual Insurance Companies. “The legislation has broad, bipartisan support, and we urge Congress not to miss another opportunity to place the NFIP on sounder financial footing.”

Once and for all, Congress needs to rise above politics and reauthorize this vitally important program so that home buyers have some sense of direction about the housing market, and stability can return to the market.

Will Congress be able to hash out its differences and extend the NFIP for the long term?