On June 29, 2012, the Senate and House passed the Flood Insurance Reform Act as a part of H.R. 4348, the Surface Transportation Conference Report. The President signed the measure into law on July 6, 2012. This is the culmination of a successful multi-year REALTOR campaign and a final push at NAR's Midyear Legislative Meetings & Trade Expo in May 2012.

It would not have been possible without the leadership of Reps. Biggert, Waters, Bachus and Frank, as well as Sens. Johnson, Shelby, Tester and Vitter.

Since 2008, Congress had been extending the National Flood Insurance Program a few months at a time. Twice this led to shutdowns, including one that stalled more than 40,000 home sales in June 2010 alone. Passage of this 5-year re-authorization will bring certainty to real estate transactions in more than 21,000 communities nationwide where flood insurance is required for a mortgage.

The bill ensures the program will continue long-term for more than 5.6 million business- and homeowners who rely on it, achieves one of NAR's top priorities for the year, and means taxpayers will spend less on federal assistance for flood disasters over the long run. NAR will continue to monitor the legislation as it is implemented.

Issue Background

Millions of American Taxpayers Rely on the NFIP for Flood Protection. Floods claimed more lives and property than any other natural disaster in the United States over the last century. Unable to ignore the rising cost to taxpayers of post-disaster payments for uninsured properties or the lack of a private market for flood insurance, Congress created the NFIP in 1968. Today, 5.6 million property owners rely on the program in 21,000 communities where flood insurance is required for federally related mortgages.

Stopgap Extensions and Shutdowns Have Exacerbated Market Uncertainty. 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 NAR survey data. Real estate markets require certainty to make the long-term investments that are vital to the U.S. economic recovery.

Private Markets Will Not Guarantee Access to Affordable Flood Insurance. The four large insurers that write virtually all the private flood insurance today do so only for “high net worth” owners and high-value property at an average price twice the NFIP’s. Reinsurance would not address the fundamental market failure, which would force private insurers to set rates that no one but the wealthiest could afford while attempting to cover NFIP’s 5.6 million policies.

Reauthorizing the NFIP Saves Taxpayers Both Money and Property. Historically, NFIP has collected enough revenue to cover its cost or pay back a short-term loan from the U.S. Treasury with interest. Even with the 2005 loan balance currently at $18 billion, reauthorization would not add to the federal budget deficit according to the Congressional Budget Office. However, the program’s requirements have already averted $16 billion in losses by strengthening millions of properties against floods. Without NFIP, there would be more uninsured and unmitigated properties, taxpayers would still be “on the hook” for disaster assistance to these properties, and there would be no premiums to pay down any remaining loan balance or collect interest.

Floods Are a National Problem Requiring a National Solution. From 1990 to 2005, flood disasters were declared in every state — along rivers and lakes, behind levees and dams, anywhere snow melted or rain fell. In June 2011, they were declared in Iowa, Kansas, Indiana, Nebraska, Montana, Vermont, New York, Alaska Illinois and Oklahoma. More than 98% of NFIP policies were issued in non-coastal communities. Historic claims data shows the top three states contributing the most net revenue to NFIP coffers were on the Gulf; the top three with the most NFIP net loss years were in the Midwest.