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House to House: National Flood Insurance Program Expiration Could Threaten Market Recovery

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Photo by the Burlington Free Press

The appearance of Hurricane Irene last weekend and the heavy rains and flooding she brought with her only underscore the importance of flood insurance, which is the only way for homeowners to financially protect their property or businesses from flood damage.

According to the National Association of Realtors®, Floods claimed more lives and property than any other natural disaster in the U.S. over the past century and have been declared in every state, along rivers and anywhere rain falls or snow melts.

Hurricane damage from water is only covered by flood insurance, which must be purchased separately through the National Flood Insurance Program (NFIP), a crucial federal program that is currently in jeopardy.  The National Flood Insurance Program is set to expire on September 30 for the tenth time in two years. The program ensures access to affordable flood insurance for more than 5.6 million home and business owners in 21,000 communities nationwide. Its expiration could drastically affect future storm recovery efforts and, perhaps more importantly to our economy, the future of our country’s fragile housing market.

It is the opinion of the Arkansas Realtors® Association that the NFIP is essential to a properly functioning housing market.  Realtors® across the country are urging Congress to reauthorize the program for the long term. Americans deserve access to affordable flood insurance, and the current uncertainty surrounding the program is already hurting many housing markets.

Since September 2008, Congress has approved nine NFIP extensions and allowed five lapses. During the June 2010 lapse, 47,000 home sales were delayed or cancelled, according to National Association of Realtors® survey data. Real estate markets require certainty to encourage the long-term investments that are vital to the U.S. economic recovery. 

Flood disasters claimed more lives and property than any other natural disaster in the U.S. over the past century.  And more recently, from 1990 to 2005 floods were reported in every single state.

There are also a number of common misconceptions that the NFIP’s current structure benefits coastal states at the expense of non-coastal states. Five of the 12 states with the fewest high flood loss years have coastlines, and data analysis shows that overall, coastal states are paying in more than they are taking out. Those states perceived to have the highest risks are actually paying their fair share and contributing more than other states. In addition, more than 98 percent of NFIP policies issued are in non-coastal communities.

In addition to a longer term reauthorization, Realtors® also support reforming NFIP to strengthen participation and put the program on the path to fiscal solvency by adding coverage options for business interruption and living expenses; indexing coverage limits; improving the scientific integrity of the floodplain mapping that determines where flood insurance is required; and streamlining the map appeals process.

Without this program millions of Americans will be without flood insurance for an uncertain amount of time.  We cannot leave these property owners in the dark and we certainly cannot afford to cause any more damage than has already been done to the housing market. That is why the Arkansas Realtors® Association is strongly urging Congress to strengthen and quickly reauthorize the NFIP.

House to House is written by Amy Glover Bryant and distributed weekly by the Arkansas REALTORS® Association.


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