Home Sales Hinge on National Flood Insurance Program Boost
The future of home sale health hinges on fixing the National Flood Insurance Program (NFIP), which is currently facing a sunset deadline and a billion-dollar shortfall, reports HousingWire. The program expires, without another reauthorization, on September 30, and could have a one-year shortfall of up to $1.4 billion, according to the Congressional Budget Office (CBO).
Thousands of home sales disrupted by program ending
Established in 1968, the program’s aim is to “reduce the impact” of flooding on private and public structures by “providing affordable insurance to property owners and by encouraging communities to adopt and enforce floodplain management regulations,” according to the website of Federal Emergency Management Agency (FEMA), which administers the program.
In the intervening years, the future of NFIP has come into question several times. The article reports that when the program was allowed to expire in 2010, more than 1,300 home sales were reportedly disrupted every day as a result.
“That’s over 40,000 every month,” said William Brown, president of the National Association of Realtors (NAR) and founder of Investment Properties. “Flood insurance is required for a mortgage in the 100-year floodplain, but without access to the NFIP, buyers simply couldn’t get a mortgage or vital protections from the number-one cause of loss of property and life: flooding,” he explained.
Budgetary shortfall could be $1.4 billion
Even if the program survives into October with a reauthorization, it is still likely to face a budgetary shortfall. According to the article, the CBO analyzed some five million policies, comparing expected annual costs and premiums. These estimated annual costs included high-cost, low-probability events, like Hurricane Harvey, meaning NFIP could have a maximum shortfall of up to $1.4 billion over the next year. However, the CBO also conducted an actuarial shortfall analysis, which came up with a more cautious, but still significant, $0.7 billion one-year shortfall estimate.