Federal Flood Insurance Changes
The 2017 hurricane season has put a lot of strain onto the National Flood Insurance Program which is currently $25 million dollars in debt. President Trump’s administration is calling for an overhaul of the program to help alleviate the pressure of growing flood related spending. If put into action, these changes could stifle the housing market yet jump-start the private insurance market.
The proposal will end insurance for newly built homes in flood prone areas after 2020. It would also allow FEMA to end insurance for home that are continuously affected by flooding. The idea is praised by some for helping to curtail people from building in areas where they are at high risk, but The National Association of Home Builders claims that the proposal will curb economic growth: “It would simply prevent home builders from being able to provide safe and affordable housing to consumers. By creating uncertainty in the housing market, this proposal would also harm local communities and impair economic growth.” The press release from the NAHB went on to say that newer homes are at less risk because they are build more soundly and with more precautions than older homes, which means insurance claims would be less.
While this proposal won’t hinder homes from being built or rebuilt and privately insured, lenders may not accept private flood insurance, which will narrow down the buying pool for new homes drastically. Though there is a regulatory proposal to require lenders to accept private insurance, the measure has not been finalized. The NFIP was temporarily extended in September and Congress has until December 8th to reinstate it.