A federal program that insures homeowners against the risks of flood has paid multiple claims on tens of thousands of particularly flood-prone homes. The insurance program is sound, but improvements should be implemented to stop these so-called “repetitive loss” properties from continuing to drain the program’s resources.

The National Flood Insurance Program insures 4.4 million homes around the country. Some 48,000 of those insured properties, a mere 1 percent of the total, have been flooded at least twice in the last 10 years. Those claims cost the program $200 million each year and account for 25-30 percent of the claims paid, according to a statement from the National Association of Home Builders. The Federal Emergency Management Agency, a division of the U.S. Department of Homeland Security, operates the program.

The builders group last week called on Congress to “address repetitive loss properties in order to ensure the long-term viability” of the National Flood Insurance Program. The group also wants Congress to “narrowly define severe ‘repetitive loss’ properties to include only those that pose the most severe flood risks.”

This approach would direct FEMA “to address the most problematic properties first, which would quickly lead to significant savings to the NFIP and ensure its long-term viability,” Steve Feldmann, director of community affairs for the Fischer Group, a home builder in Kentucky, last week told a U.S. Senate subcommittee.

There’s no question that Congress should take action. However, a too-narrow definition of repetitive loss properties would leave in place the current injustice of 4.4 million policyholders each paying an extra $45.45 each year for those 48,000 sadly and unfortunately flood-prone homes.

The high cost of repetitive loss properties to the national flood program is not a new problem. In fact, it’s a problem that’s existed for years.

Legislation first proposed nearly five years ago would have set aside $400 million–two years’ worth of repetitive-loss payouts–to buy out homeowners who suffered repetitive flood losses. Those who didn’t want to sell or elevate their properties could have kept their federal flood insurance, but would have had to pay market-rate premiums, instead of the low subsidized rates. The “Two Floods and You’re Out” legislation wasn’t enacted, and maybe it wasn’t exactly the right solution.

Nonetheless, it’s high time Congress took action to fix the problem of repetitive-loss properties, and that action should be aggressive and results-oriented, not merely symbolic.

Congress also should take the real estate industry’s advice and make the flood insurance program permanent or at least reauthorize it for several years at a time. The program is routinely reauthorized year after year, except when Congress is too busy to attend to it. In those years, the program lapses just long enough to create unnecessary stress and confusion for home buyers. Permanency would add stability and save people who buy a flood-plain house during a lapse period some trouble and worry about their new-bought home.

Images courtesy of FEMA.


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