Homeowners in flood-prone areas of Ahwatukee may want to pay attention to Congress over the next month.
Congress has until March 23 to reauthorize the National Flood Insurance Program – generally the only way homeowners can recoup the cost of damage caused by water from a source outside their dwelling.
Congress passed – and President Trump signed – an extension of the program earlier this month.
“Congress must now reauthorize the NFIP by no later than 11:59 pm on March 23, 2018,” the Federal Emergency Management Agency states on its website.
Although the agency assures homeowners, “FEMA and Congress have never failed to honor the flood insurance contracts in place with NFIP policyholders. In the unlikely event the NFIP’s authorization lapses, FEMA would still have authority to ensure the payment of valid claims with available funds.”
But it also warns it will “stop selling and renewing policies for millions of properties in communities across the nation.”
The Maricopa County Flood Control District last year completed a study showing that more than 492 homes and buildings in Ahwatukee would sustain damage exceeding $5 million in a 100-year flood.
The term “100-year flood” refers to an extreme event that has a likely recurrence interval of a century. Put another way, such a major flood has a 1 percent chance of happening in any given year.
But flooding has been a persistent, though not an annual, problem in the community and homeowners without flood insurance have been forced to pay thousands out of pocket on repairs.
The vast majority of conventional homeowners policies do not compensate homeowners if water from an outside source – for example, mountain runoff – flooded their property.
Nationwide, the National Association of Realtors estimates that a lapse might impact approximately 40,000 home sale closings per month.
FEMA expressed frustration over Congress’ failure to reauthorize the program for a period of several years as well as concern for policyholders in light of last year’s devastating hurricanes in Texas and Florida.
“As affected communities recover from the devastating impacts of the 2017 hurricanes, a timely, multi-year reauthorization is critical for insured survivors and businesses,” it said, adding:
“Policyholders need confidence not only that FEMA can pay flood insurance claims, but also that the NFIP will be able to sell and renew policies to help them protect against future flooding. Flood insurance – whether purchased from the NFIP or through private carriers – is the best way for Americans to financially protect themselves from losses caused by floods.
The flood insurance program owes billions to the U.S. Treasury as a result of losses racked up since Hurricane Katrina devastated Louisiana in 2005.
The Treasury debt had soared to almost $25 billion, but President Donald Trump recently signed a bill forgiving $16 billion.
But billions more in losses are expected to roll in as a result of 2017’s storms, pushing up the debt again, experts warn.
And who knows what this year will bring, they add.
“We know flooding is the most common and costly natural disaster in the United States, and it’s not getting better anytime soon,” says Laura Lightbody, who directs the Pew Charitable Trusts’ project on weather-related catastrophes. “We’ve got to face the problem head-on. These events are happening not only more frequently, but [also] in places that no one would have predicted.”
The federal program serves about 5.1 million households, which pay an average $1,100 a year for premiums and fees for primary residences, and $1,350 for second homes.
The federal government started offering the coverage in 1968. At the time, private insurance companies avoided flood risk, which they considered too unpredictable. The program maintain relative solvency until Katrina hit.
Since then, the seemingly endless procession of monster storms have roiled the program.
“The basic problem is simple: The program, which subsidizes about 20 percent of the policies written, is not collecting enough to cover losses,” Realtor.com reported. “Congress passed a bill in 2012 that would raise premiums, but after an outcry from homeowners in flood areas, some of those premium increases were reversed.”
Some reports indicate Congressional Republicans want to address the program’s troubles by cutting the amount paid to private insurers that sell and service the policies – but don’t carry the actual risk.
Proponents maintain the House bill would also encourage private insurers to enter the market, improve flood mapping, and cap annual increases on homeowners’ premiums.
The SmarterSafer Coalition – representing environmental, housing, taxpayer and insurance groups flood insurance reform – supports the bill, but warn that likely would drive up the cost of a policy.
Critics warn high premiums could prompt lower- and middle-income homeowners already living in flood plains to drop coverage, leaving them no way of quickly recovering from a devastating flood-related loss.
A bipartisan group of U.S. senators from coastal states have proposed the Sustainable, Affordable, Fair, and Efficient (SAFE) Flood Insurance Reauthorization Act, which would reauthorize the flood insurance program for six years.
Like the House bill, it would cut the amount paid to the private insurance companies that sell and service the flood policies.
SAFE would also subsidize premiums for some homeowners, based on financial need. And it would put more money into buying out properties that have flooded repeatedly, and returning them to green space.
The Congressional Budget Office recently estimated that the federal program was running at an annual deficit of about $1 billion. The shortfall comes mostly from coastal areas.