Testifying before the House Financial Services Subcommittee on Housing and Community Opportunity, NAHB First Vice Chairman Barry Rutenberg, a home builder from Gainesville, Fla., said that the home building industry depends upon the NFIP to remain available, affordable and financially sound.
"A strong, viable national flood insurance program helps ensure the members of the housing industry can continue to provide safe, decent and affordable housing to consumers," said Rutenberg. "We are pleased to see the subcommittee propose a five-year extension of this important program."
The federally-backed flood insurance program suffered unprecedented losses stemming from the devastating 2004 and 2005 hurricane seasons, with combined claims from these two years exceeding the total amount paid during the previous 37-year existence of the NFIP program.
As Congress moves to reform the NFIP to ensure its financial stability, Rutenberg urged lawmakers to proceed with care, noting that it is not simply about flood insurance premiums and payouts, but also 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," he said.
During the past several years, the NFIP experienced several short-term lapses in authorization, forcing many home buyers to delay or cancel closings due to the inability to obtain flood insurance for a mortgage. In other instances, builders were forced to stop or delay construction on new homes due to the lack of flood insurance approval, adding unneeded delays and job losses.
To improve the solvency of the program and its attractiveness to potential policyholders, 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 replacement costs would provide more assurances that the legitimate losses will be covered and benefit program solvency by generating increased premiums.
- Creating a more expansive "deluxe" flood insurance option, or a menu of insurance options from which policyholders could pick and choose, could 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.
More than 20,000 communities nationwide participate in the insurance program, which currently covers about 5.5 million policyholders.