By Steve Brown, First Vice President, National Association of REALTORS®
On December 17, Congress passed an extension of the National Flood Insurance Program, known as NFIP, until May 31, 2012. This is good news because NAR research estimates that each day of an NFIP lapse results in the delay or cancellation of 1,332 home sale closings nationwide.
Floods are a devastating problem with a huge impact, not only on the real estate business, but on human lives. Anyone who has experienced the personal loss and the accompanying life disruption of home flooding knows how debilitating this is.
It doesn’t matter where one lives to be affected by flooding. From 1990 to 2005, flood disasters were declared in every state—along rivers and lakes, behind levees and dams, anywhere snow melted or rain fell.
Because of the rising cost to taxpayers of post-disaster payments for uninsured properties and the lack of a private market for flood insurance, Congress created NFIP in 1968. The idea was to ensure that, through NFIP, homeowners and renters could access affordable flood insurance.
Today, 5.6 million property owners rely on NFIP in 21,000 communities where flood insurance is required.
Adding to the problem, private markets will not guarantee access to affordable flood insurance. The four large insurers that write virtually all the private flood insurance today do so only for “high net worth” owners and high-value property at an average price twice the NFIP’s.
NAR is committed to protecting the long-term stability of the NFIP and to ensuring that flood insurance rate maps are regularly and accurately updated. Reauthorizing the NFIP saves taxpayers both money and property. That’s because historically, NFIP has collected enough revenue to cover its cost or pay back a short-term loan from the U.S. Treasury with interest.
Without NFIP, there would be more uninsured and unmitigated properties, taxpayers would still be “on the hook” for disaster assistance to these properties. Also, there would be no premiums to pay down any remaining loan balance or collect interest.
And not only does the reauthorization of NFIP makes good sense economically, it also is another element in bringing stability to the housing market. The real estate consumer will feel more confident in purchasing a home knowing that the property can be reasonably insured. This in itself brings stability to housing values and prices.
Over the next six months, NAR will continue to push Congress for a five-year NFIP re-authorization bill to provide certainty and avoid further disruption to real estate markets. Your Calls for Action remain essential in getting the message to Congress to stop this ongoing uncertainty when it comes to housing policies. Keep on the lookout for upcoming activity, and be sure to let Congress know where REALTORS® stand.