FEMA’s flood insurance program is set to expire on Sept. 30. Then what?

The National Flood Insurance Program, which accounts for 88% of the nation’s flood insurance and is managed by the Federal Emergency Management Agency, is set to expire on Sept. 30.

If Congress and the Trump administration don’t reauthorize the program, experts warn it could leave millions of high-risk properties in limbo or uninsured, including in North Carolina. It could also have “ripple effects” across the mortgage market.

“While private insurers may fill some gaps, coverage could be become less consistent, straining household finances and complicating mortgage markets,” said First Street, a New York-based nonprofit research company in a newly released report.

Since the late 1960s, NFIP has anchored mortgage eligibility and collateral in flood-prone areas. Today, it covers 4.7 million policies totaling $1.28 trillion in property value.

While private insurers now cover 12% of all insurance policies, 5% of current NFIP policies, about 235,000 properties, are too risky for the the private market, First Street said. Another 10 million properties outside FEMA-designated special flood hazard areas have significant risk, but likely lack insurance due to gaps in both FEMA’s flood modeling and limited regulatory enforcement. That’s alongside an additional 3.2 million uninsured properties within hazard areas, the data showed.

If flood insurance becomes less available or affordable, this could lead to “more credit losses and deepen housing affordability and financing (shortages) in flood-prone regions,” First Street said.

NFIP has been under pressure for years and is currently over $20 billion in debt. In recent months, President Donald Trump said he’d like to dismantle FEMA — and NFIP — as part of a broader plan to reduce the government’s size. Critics argue NFIP is unsustainable and encourages risky development in flood-prone areas. But opponents warn dismantling the program could collapse the housing market and drive down property prices.

Nationwide, the National Association of Realtors estimates that a lapse would affect approximately 1,300 property sales each day — roughly 40,000 closings per month.

Jason Tyson, a spokesman for the North Carolina Department of Insurance, said officials are monitoring the situation closely. “Our team is constantly in communication with representatives at the federal level,” he said.

In the meantime, he advised homeowners to contact their local insurance agent to discuss their “specific home’s needs.”

Standard homeowners’ insurance policies don’t cover flood damage. Customers typically buy protection as an “add-on” in a separate private flood policy, or through NFIP. Some lenders require flood insurance for homes in high-risk zones. Outside those areas, it’s optional but often wise.

In North Carolina, on average, the rate for flood insurance is $802 per year through NFIP, according to the latest LendingTree data.

If NFIP is dissolved or allowed to lapse, FEMA said it would continue to pay claims on active policies if funds are available.

However, no new policies or renewals would be issued, according to its website.

NFIP’s authorization has lapsed at least three times since 2018, but eventually was restored over a cycle of short-term extensions. Congress is considering legislation to extend the program through 2026.

Meanwhile, groups like the NAR are pushing for a long-term reauthorization. They’re also calling for regulatory reforms to expand private market options.

For would-be buyers, the key is to stay informed, said Tana Widdows, a Compass agent at Terra Nova real estate services in Chapel Hill.

“I’d encourage clients not to delay their plans,” she said. “They should also work closely with their lenders and insurance agents to understand how a lapse could affect closing timelines and their monthly payment.”

©2025 Raleigh News & Observer. Visit newsobserver.com. Distributed by Tribune Content Agency, LLC.