Senate considers flood insurance reforms, but roadblocks remain

The U.S. Senate Committee on Banking, Housing and Urban Affairs held a hearing on Thursday that focused on the reauthorization of the National Flood Insurance Program (NFIP), showing that its bipartisan support is generally intact. But senators also expressed concerns about affordability after a new ratings methodology led to higher premiums in some parts of the country.

In opening remarks, committee chairman Sherrod Brown (D-Ohio) focused primarily on the program’s insurance and flood abatement policies, saying that insurance is only one component of the program. There are also floodplain management and mapping functions, in addition to mitigation practices.

“NFIP is a complex program, with multiple goals and implications for many of the things people care about most — their homes and their communities,” Brown said. “However, I believe it is possible for us to come together to reauthorize and improve this program.”

Ranking member Tim Scott (R-S.C.) focused on a need for what he called “comprehensive reform” to the program, saying that local perspectives in the most impacted areas need to be prioritized over those of “Washington bureaucrats.”

“The status quo is not an option,” Scott said. “The program is financially insolvent, with over $20 billion in debt. Instead of educating communities and homeowners on the risks they face, the program’s outdated flood maps and lack of transparent data often obscures the risks.”

Congress cannot afford to allow the program to lapse either, Scott said. But other senators pointed out that there are issues related to affordability that require attention from lawmakers. Sen. John Kennedy (R-La.) and Sen. Robert Menendez (D-N.J.) both expressed concerns about the cost of NFIP-associated premiums.

“Since [the Federal Emergency Management Agency (FEMA)] recently changed its rating methodology, the program has lost 150,000 policyholders,” Menendez said. “FEMA itself has estimated that it will lose one million policyholders by the end of the decade due to the premium increases. In Patterson, N.J. — where the median household income is $50,000 a year — policyholders would see their premiums increase from an average of $1,500 a year to an average of $4,000 a year.”

Even with a demonstration of bipartisan support for reform, including the affordability of premiums, the program has a shoddy track record of getting over the legislative finish line. Since September 2017, NFIP has been reauthorized without dedicated legislation 28 times. The current extension is set to expire on March 8, 2024.

Shortly after FEMA instituted its new ratings methodology in 2021, lawmakers were worried that thousands of families would ultimately drop out of the program during the next decade, primarily because of premiums that would become unaffordable.

At the time, FEMA estimated that “23% of families will see a decrease in their premium during their policy’s renewal. Another 66% will have increases between $0-$10 per month on average, and 11% will pay more than $10 per month on average,” according to previous reporting by HousingWire’s Flávia Furlan Nunes.