One of the most significant land use issues facing Congress this year is reauthorization of the National Flood Insurance Program (NFIP). The NFIP is a FEMA managed program that provides flood insurance, analyzes and improves floodplain management, and develops flood plain maps (called Flood Insurance Rate Maps or “FIRMs”) showing different types of flood zones. The NFIP was created in 1968 as a national effort to respond to an ever-increasing need for flood disaster assistance and to give private property owners a way to get flood insurance in places where private insurance companies did not and would not offer flood insurance coverage. With a previously set expiration date of September 30, 2017 looming and major hurricanes wreaking havoc on U.S. states and territories, Congress recently passed a short term extension of the NFIP with a new expiration date set for December 8, 2017.
Update December 26, 2017: Congress has again extended the expiration date of the National Flood Insurance Program by including it in the latest continuing resolution federal budget “stop-gap” measure just before the Christmas holiday to fund federal government operations through the beginning of next year. The new expiration date is January 19, 2018.
Update December 8, 2017: The helpful staff at U.S. Senator Bill Nelson’s office have confirmed that the December 8 expiration date has been briefly extended to December 22 along with a two-week spending package that Congress has passed in order to keep the government operating through December 22.
Florida property owners are likely to be more affected than anyone else in the country by the NFIP’s reauthorization and any changes to the program. That’s because the state accounts for over 1.7 million NFIP policies, by far, the most in the country. Florida NFIP policies make up almost 35% of the five million policies held nationally and are nearly three times the number of policies held in Texas – the state with the second most NFIP policies.
Private insurers have largely been out of the flood insurance market for almost a hundred years, as the risk pools are often too concentrated to spread out costs. In addition, the NFIP’s rates have been historically low and not representative of true risk, therefore making it difficult for private insurance companies to compete with the NFIP’s low rates. According to a 2017 U.S. Government Accountability Office (GAO) report, the program had a debt of $24.6 billion as of March 2017, and its problems don’t end there. By subsidizing flood insurance in flood-prone areas, some argue that the program actually encourages people to go ahead and build in unsuitable locations. In the aftermath of Hurricane Harvey, it was widely reported that one house had been flooded and rebuilt 16 times, receiving $800,000 from the program despite only being valued at $115,000. Repeated assistance to identified repetitive flood loss properties is one of the biggest criticisms of the NFIP. In all, repetitive flood losses like these around the country mean that 2% of covered properties receive 40% of the damage claims.
Extreme weather events like Harvey, Irma, and Maria bring an urgency to the question about NFIP reauthorization and whether it will be reformed in any way. The effects of these storms on the NFIP’s debt and ability to provide assistance are not yet known. But those who will rely on the program to rebuild destroyed property will be even more convinced of the program’s necessity. As NFIP claims increase, members of Congress will be giving serious thought to reform, and stakeholders from all sides will hope for some clarity before December 8, when the temporary reauthorization ends. How will FEMA FIRM maps be revised? Will new guidelines for known repetitive flood loss properties be proposed? How will local governments change their land development codes in response to NFIP reforms? These are just some of the questions property owners, neighborhood associations, developers and local governments will be asking.
Stay tuned to our blog where we will examine these questions and provide updates about the NFIP reauthorization and its impact to land development.