As of September 30, 2011, the National Flood Insurance Program (NFIP) is due to expire for the tenth time in a period of 24 months.
The NFIP is designed to provide homeowners and business owners with affordable flood insurance, and it does so within 21,000 communities across the country for over 5.6 million homes and businesses.
Cleveland Area Board of Realtors co-director, Barbara Lachowicz, explained that the program is vital to a housing market that is capable of functioning properly. She went on to say that “Americans deserve access to affordable flood insurance, and the current uncertainty surrounding the program is already hurting many housing markets.”
The NFIP is suffering from several different struggles, including the fact that it is drowning in a $17.8 billion debt that has accumulated since 2005 following Hurricane Katrina, and its ongoing need to borrow more money to cover flood claims, which have brought about concerns regarding its fiscal solvency in the long-term.
Another major problem that the NFIP is trying to overcome includes the overwhelming battle of the program’s subsidy of flood insurance. In 2010, the average premiums were $1,121, where the true costs ranged between $2,500 and $2,800.
Lachowicz also added that if this federal program is left in jeopardy, recovery efforts for the fragile housing market – that is only just hinting at stabilizing – may be drastically affected.
There have been five lapses and nine extensions to the NFIP that have been approved by Congress since September 2008. According to survey data from the National Association of Realtors, at the time of the lapse in June 2010, there was a delay or cancellation of 47,000 home sales.
According to Lachowicz, there have been more lives and properties taken by flood disasters than any other form of natural catastrophe in the United States in the last hundred years. Between the years 1990 and 2005, there were floods reported in all 50 states. She explained that if the NFIP is allowed to fail, millions of Americans will not have any form of flood insurance for an indefinite period of time.
