The already crippled federal flood insurance program expires May 31, the 10th such deadline in the past two years because Congress keeps dithering over the need for reform. This time is no different.
The program’s extension is caught up in a House-Senate dispute over the terms of a disaster relief bill that President Donald Trump opposes as too generous, and progress is reportedly stalled.
If that problem is not solved, another temporary extension may be necessary. Letting the program lapse is not a practical option.
All mortgages that flow through federally regulated lenders require flood insurance for properties in flood-prone areas and private insurance is often unavailable. If the program expires — the Senate has yet to sign off — a crisis in real estate, finance and among millions of property owners will be widely felt.
But clearly the need for reform is urgent.
The National Flood Insurance Program (NFIP) is not collecting sufficient fees to cover its losses. It is billions of dollars in debt and stands to become even less solvent as sea levels rise and storms grow stronger.
One reason for the federal program’s losses is that while it overcharges some property owners, it grossly undercharges others in more risky and usually more costly locations.
The program also should not allow properties to repeatedly collect for flood damage when the evidence shows that their buildings are subject to repeated storm damage. In effect, some property owners have been subsidizing others who live in overly vulnerable homes.
The Federal Emergency Management Agency that manages the NFIP has begun to take steps to improve flood-risk analysis and insurance pricing. Using new risk models, it plans to introduce next year what it calls “Risk Rating 2.0” in an effort to increase fees for riskier properties and reduce fees for less risky ones. The agency hopes that the new approach will increase the number of homeowners who choose to have federal flood insurance.
But limits written into current law and structural flaws within the program itself will limit the ability of FEMA to make flood insurance sustainable by simply adjusting rates.
Reform of the basic law is necessary. Among the reform ideas that deserve support are requiring property owners to report to potential buyers at settlement any flooding of the property and directing any subsidies in the program to low-income families.
House hearings last spring also addressed one of the gravest shortcomings of the NFIP: its shortage of up-to-date digital maps that accurately reflect flooding risks.
S.C. Department of Natural Resources flood mitigation coordinator Maria Cox Lamm said it clearly in an address to the Association of State Floodplain Managers.
“Floodplain mapping is the foundation of all flood risk reduction efforts” and critical for community planning, she explained.
Ms. Lamm further noted that “flood risk maps only exist for about a third of the nation ... [and] some of the maps are many decades old.”
She said the need for new maps includes mapping undeveloped areas targeted for development before the investment starts in order to save later costs.
She recommended increasing the $400 million a year allocated for federal floodplain mapping to speed the production of new digital maps, replace old paper ones and to greatly increase coverage. That sensible proposal would save billions of dollars in the long run.
The necessary reforms have been carefully reviewed and debated for several years. It is time to enact them and extend the NFIP.