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Flood insurance offers opportunities for positive housing policy

Affordable housing stakeholders should pay attention to flood insurance, because it offers one of the few areas for imminent, positive policy change. Lawmakers are planning to start soon on reauthorizing the National Flood Insurance Program (NFIP). Reauthorization offers a chance to improve the program in ways that get people out of harm’s way while directing help with costs to those in need. NHC along with our partners in the SmarterSafer Coalition briefed Senate staff last week, and we will keep focus on the flood insurance issue.

In the last two major NFIP reauthorizations, affordability has been at the center of the policy debate, but without much input from the affordable housing community. Both the 2012 Biggert-Waters law and the 2014 Homeowner Flood Insurance Affordability Act struggled with the tradeoff between 1) making flood insurance rates reflect real risk and 2) raising the cost of flood insurance, which can be required for a mortgage. Affordability loomed large in feedback legislators received from constituents, whether they were homeowners on the margin for whom any increased cost could be unaffordable or wealthier homeowners surprised and upset by the prospect of much higher than anticipated insurance bills.

The NFIP expires in September, and Congress is preparing to act. Chairman Hensarling of the House Financial Services Committee has said reforming NFIP will be a major focus this year. Senators on the Banking Committee are also looking at the issue and invited SmarterSafer to brief them last week. Flood insurance is a rare area that offers possibility for bipartisan action with direct benefit to people nationwide.

So what needs to change in NFIP? The cost of flood insurance should send true signals about risk; it doesn’t now. Indeed, the program effectively subsidizes homes at high risk. We need to improve the mapping of risk, create more private options for better insurance coverage and encourage homeowners and communities to mitigate the risks they face. These are essential changes for a program nearly $24 billion in the hole.

Affordability help is key to this change. They only way these program changes can happen is if we ensure that no one is displaced because of the cost of flood insurance and that homeowners and communities get the help they need to mitigate risk. The SmarterSafer proposal sketches out ways to help, including means-tested assistance for homeowners that can convert to up-front mitigation help that is implemented through private loans. We also propose community-level mitigation help using natural features to buffer against hazards whenever possible.

We’re still a long way from NFIP reauthorization, but with the right efforts from the affordable housing community, we may very well see real, positive change this year.

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