Why should the federal government re-authorize the National Flood Insurance Program (NFIP)?

Each year the federal government spends billions of dollars on disaster relief to flood victims – all at taxpayer expense. Floods claim more lives and property than any other natural disaster and flood disasters have been declared in every state in the past 5 years alone. Floods are not only coastal issues; they occur nearly anywhere, anytime. Flood zones exist along rivers, lakes, creeks, as well as the coasts. If more properties were insured for flood damage, fewer owners would turn to taxpayers for disaster relief after the next major flood.

The National Flood Insurance Program (NFIP) was created to provide incentives for communities to rebuild to higher standards and steer development away from flood zones. In exchange, communities gain access to flood maps, mitigation assistance and subsidized insurance to prepay for future damage and recover more quickly from flooding. However, the program was never designed to absorb the catastrophic losses of the last decade including Katrina (2005), Sandy (2008) and Baton Rouge (2016). As a result, NFIP has borrowed $25 billion from the Treasury and is making interest-only payments of $400 million a year.

The NFIP was last up for re-authorization in 2008. There were 18 short term extensions and a two-month shutdown before Congress reauthorized the program in 2012. Current authority for the NFIP expires on September 30, 2017.

“Congress must act before the end of September to make a number of critical improvements to the NFIP including increased funds for mitigation activities, caps on overall premium increases, improved claim and mapping processes, as well as removing hurdles for more private market participation in the flood insurance market,” said Snohomish County-Camano Association of Realtors® President Natasha Zieroth-Chaumont “Collectively these improvements will benefit both homeowners and taxpayers.”

Long Term Reauthorization Is Critical

Over 5 million homeowners in 22,000 communities around the country rely on the NFIP to provide flood insurance. The NFIP is important to many housing markets in Snohomish County and Western Washington that are identified within national flood mapping areas. Without NFIP coverage home sales, in areas where flood insurance is required, will be delayed or even cancelled. The National Association of REALTORS estimates that past lapses of the program have effected as many as 40,000 transactions a month nationally.

Risk Mitigation Keeps Rates Affordable

The best way to keep NFIP rates reasonable is to reduce the risk. Elevating a property by two feet can cut flood insurance premiums by as much as two-thirds. U.S. government spends $1.4 billion a year on grants to property owners to repair flood damage. Mitigating, elevating or relocating these properties would save taxpayers $4 for every $1 spent. Currently, property owners cannot access mitigation grant dollars until after the property floods despite it being more cost effective to elevate or relocate beforehand.

Private Market Options Must Be Included

NFIP premiums are based on national averages, so half of policyholders pay too much and half pay too little in premiums. Enabling consumers to meet federal requirements with a private plan offers an alternative to overpriced NFIP policies. There is a considerable and growing private market that is offering better coverage at a lower cost than the NFIP.

Accurate Flood Maps Are Essential

NFIP should use modern mapping technology to produce building-specific risk assessments. Currently, property owners bear the burden of amending the maps to remove low-risk buildings from the floodplain. Map amendments require property owners to buy 25,000 land surveys each year at $500 each. The current method of flood mapping and amendment is inefficient when states are using light detection and ranging (LiDAR) to collect the data for whole neighborhoods at once.

Congress returns from their August recess after Labor Day weekend on September 5th, 2017. They have until September 30, 2017 to pass H.R. 2874, “The 21st Century Flood Reform Act” and reauthorize the NFIP. However, if they fail to take action by that date, many homeowners could find themselves in deep water.

The Snohomish County-Camano Association of Realtors® is “the voice for real estate in Snohomish County.” If you have questions for The Expert about Real Estate email us at info@sccar.org.

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