Home Builders Applaud Congressional Efforts to Extend National Flood Insurance Program

---

In a prepared statement released today, the National Association of Home Builders (NAHB) expressed support for congressional efforts to enact a long-term extension of the National Flood Insurance Program (NFIP) that would ensure that the federally-backed flood insurance program remains available, affordable and financially healthy.

Testifying before the House Financial Services Subcommittee on Housing and Community Opportunity, Barry Rutenberg, second vice chairman of NAHB and a home builder from Gainesville, Fla., urged Congress to approach this legislation with care.

"The NFIP is not simply about flood insurance premiums and payouts," said Rutenberg.  "Rather, it is a comprehensive program that guides future development and mitigates against future loss. While a financially stable NFIP is in all of our interests, the steps that Congress takes to ensure financial stability have the potential to greatly impact housing affordability and the ability of local communities to exercise control over their growth and development options."

The NFIP recently experienced several short-term lapses in authorization, forcing many home buyers to delay or cancel closings due to the inability to obtain NFIP insurance for a mortgage. In other instances, builders were forced to stop or delay construction on a new home due to the lack of flood insurance approval, resulting in unnecessary delays and job losses.

With the hurricane season just weeks away, NAHB supports a long-term extension to ensure the nation's real estate markets operate smoothly and without delay and commends the subcommittee for acting quickly in this regard, said Rutenberg.

To improve the solvency of the program and its attractiveness to potential policy holders, NAHB supports a number of reforms designed to allow the Federal Emergency Management Agency (FEMA) and the NFIP to better adapt to changes in risk, inflation and the marketplace:

• Increasing coverage limits to better reflect today's home values would provide more assurances that losses would be covered and generate increased premiums that would boost the program's solvency. NAHB is pleased that the subcommittee's draft legislation includes this much-needed increase.

• Creating a more expansive "deluxe" flood insurance option, or menu of insurance options from which policyholders can pick and choose, would provide additional home owner benefits while aiding program solvency.

• Raising the minimum deductible for paid claims would provide a strong incentive for home owners to mitigate and protect their homes, thereby reducing potential future losses to the NFIP.

• Regarding the inclusion of building codes in flood plain management criteria, NAHB believes it would be beneficial to evaluate the effectiveness of allowing states to use the national model codes (those promulgated by the International Code Council) with state-specific amendments, as currently allowed.

Before any reforms are enacted to change the numbers, location or types of structures required to be covered by flood insurance, NAHB believes that FEMA should first demonstrate that the resulting impacts on property owners, local communities and local land use are more than offset by the increased premiums generated and the hazard mitigation steps taken, said Rutenberg.

"NAHB is pleased that the subcommittee's draft flood insurance legislation requires FEMA to conduct a study of the feasibility and implications of such a change in the NFIP's mandatory purchase requirements," he said.

In a related area, NAHB supports H.R. 1264, the Multiple Peril Insurance Act of 2009, which would provide wind insurance for home owners. Sponsored by Rep. Gene Taylor (D-Miss.), the bill also references the mitigation requirements of consensus-based building codes as a measure to lessen the potential damage caused by a natural disaster and thus further ensure the financial stability of the NFIP.

Established in 1968, the NFIP offers affordable flood insurance to home owners and businesses in flood plains and other low-lying areas that otherwise might not be able to obtain coverage.

More than 20,000 communities nationwide participate in the insurance program, which currently covers about 5.5 million policyholders.
 

---