The dramatic last-minute Congressional move to fund the federal government until November 17 means that the National Flood Insurance Program will remain intact for at least that long.
Created by Congress in 1968, the program insures more than 5 million homes across the country, providing hundreds of thousands of dollars of flood coverage when such is required to secure a federally backed mortgage.
The program’s last multi-year reauthorization expired in September of 2017. In the six years since, the program has been extended nearly two dozen times.
According to a recent press release issued by the National Association of Home Builders, past disruptions of the program have “caused immediate and widespread impacts on property sales, home values, and consumer confidence.”
In a letter sent to Congressional leaders before the budget deal was forged, the NAHB said any disruptions in the program “may have a significant negative economic effect on home builders, home buyers, multifamily developers, and renters.”
As reported in the publication Insurance Journal, a lapsing of the flood insurance program could jeopardize as many as 1,300 real estate closings on a daily basis. On the other hand, should Congress prove unable to keep the program funded, “private flood insurers will no doubt see an increase in business.”
Analysts studying the program say that while its extension is vital, a more serious financing issue still needs to be addressed: the program is operating in the red, with its flood fund losing nearly $1.9 billion last year.
Kentucky Senator Rand Paul has pushed for a complete review of the program’s financing, remarking in open Senate debate, “We’re told that the program is funded through insurance premiums. But the premiums are below the market rate, and so the program is eternally and consistently short of money.”
Paul has proposed that the program should not be tapped into by wealthy homeowners. “If you have a half-a-million-dollar mansion on the beach, guess what, you get to buy your own insurance,” he remarked.
By Garry Boulard
