Shutdown could cost Texans coverage

As Congress negotiates a short-term deal to keep the government funded and avoid a shutdown on Oct. 1, homeowners might not be thinking about their flood insurance.

But most flood insurance policies in Texas are written by the federal government. If Congress doesn't act to reauthorize the National Flood Insurance Program by Sept. 30, it will lapse, leaving thousands of Texans vulnerable during hurricane season, which goes through November.

On Tuesday, members of Congress were still negotiating over a short-term spending bill. House Democrats approved a measure on Friday, but it died in the Senate after Democrats blocked the measure, demanding more funding for health care, among other provisions.

Here's what to know about flood insurance as a government shutdown looms.

What is the NFIP?

Anyone can buy a policy through the NFIP, which was created in the 1960s after private insurers largely stopped offering flood coverage.

Any property with a federally backed mortgage in a floodway or in the 100-year FEMA floodplain, where there is a 1% chance of flooding each year, is required to carry flood insurance.

Roughly half of the residential NFIP policies in Texas -- about 247,000 -- are in Harris County.

Why is the NFIP expiring?

The NFIP was last fully reauthorized in 2012 under President Barack Obama. Since the five-year authorization expired in 2017, lawmakers haven't agreed on legislation that would reauthorize and reform the flood insurance program. Instead, Congress has passed 33 short-term reauthorizations to keep the program funded, most recently in March.

The 34th is part of the short-term funding bill currently being negotiated by Congress that would carry the program through Nov. 21.

What happens if the NFIP expires?

Existing policyholders would maintain coverage, but wouldn't be able to renew when their policy expires. And people looking to buy homes in floodplains won't be able to get new policies, which could be a hit to the housing market.

In 2010, when the program lapsed for a little over a month, over 1,400 home sale closings were canceled or delayed each day, according to the National Association of Realtors, representing over 40,000 home sales per month.

"I think if all of a sudden the National Flood Insurance Program lapses for a month or two and it continues to be a trend, then builders will opt to not build in certain areas because of the risk of not being able to sell those homes," said Cody Miller, Director of Government Affairs for Greater Houston Builders Association.

The NFIP would also have fewer resources available to cover losses in the event of a hurricane or flooding event. Currently, the program can borrow up to $30 billion from the U.S. Treasury to pay claims, but without reauthorization that borrowing capacity would be reduced to $1 billion.

What would a long-term authorization include?

Many lawmakers want to pass comprehensive reform of the NFIP and say no action could result in a collapse of the program, which covers 4.7 million properties across the country.

Without a long term reauthorization, "the National Flood Insurance Program is ... thrown into a legal purgatory every year or even sometimes multiple times a year," said U.S. Sen. Bill Cassidy, a Republican from Louisiana, when he introduced a bill in March that would reauthorize and fund federal flood insurance until the end of 2026.

In September, U.S. Reps. Lizzie Fletcher, a Houston Democrat, and Randy Weber, a Beaumont Republican, announced the creation of the Bipartisan Flood Resilience Caucus and urged House leadership to pass a long-term reauthorization of the program.

But the issue has been a politically thorny one that doesn't fall along the traditional Republican versus Democratic divide, said Joel Scata, a senior attorney in the Natural Resources Defense Council's climate adaptation division.

"It's more a divide between coastal homeowners and inland homeowners," he said. "And the way that the program traditionally worked is that it really subsidized coastal home building. And so I think that there's a fear that if there's any reform that could challenge that status quo."

But flood-related losses in inland states are increasing, driven by heavier rainfall, and could change the political calculus in Washington.

"More people are going to need flood insurance, more people need to be covered, and the program, the way it operates, is stuck in the seventies," Scata said.

Many advocates say the program should offer premium discounts to low-income homeowners so they can afford to stay insured as prices have soared. In 2021, FEMA began implementing a new pricing model for flood insurance that captured risk more accurately but also caused prices to jump in high-risk areas. Nationally, only 15% of homes in FEMA's 100-year floodplain have federal flood insurance, largely because of cost.

By focusing on short-term solutions, lawmakers are "kicking the can down the road on affordability and fairness and people's ability to recover," said Zoe Middleton, the Houston-based associate director of Just Climate Resilience at the Union of Concerned Scientists, a nonprofit advocacy group.

How many homeowners in Texas are covered by the NFIP?

According to the latest FEMA data, there are 606,000 residential policies in Texas.

Many more people live in mapped flood zones than carry flood insurance -- and FEMA's flood maps underestimate flood risk in many areas. Harris County officials have been waiting for updated maps since 2018, when FEMA began an overhaul of the map that encompasses Houston.

A recent Houston Chronicle investigation found that since Hurricane Harvey, roughly 57,000 residential properties, or about 1 in every 5 homes, have been built in flood zones. Most of those homes are required to carry flood insurance.

Do homebuyers have any other options for flood insurance?

Yes. An increasing number of private insurers offer flood insurance. Roughly 14 percent of policies written nationally are by private insurers, according to data collected in 2022 by the National Association of Insurance Commissioners.

Neptune Flood, the country's largest private flood insurer, writes "tens of thousands of policies" across Texas, said Trevor Burgess, the company's CEO. A recent report from Neptune found that roughly half of homeowners in Texas could save money by switching from NFIP policies to private insurers.

The average annual cost of federal flood insurance in Texas is $779, according to FEMA, on top of the roughly $3,800 homeowners pay on average for insurance.

Bill Baldwin, a board member of the Houston Association of Realtors, said he would advise buyers closing in early October to either secure a NFIP policy now, or look to the private market for flood insurance.

"It'd be a better risk than not having any flood insurance or not being able to close on your home," he said.

Homeowners with policies up for renewal in October should also consider renewing early, he said.