NAHB testifies before Congress on flood insurance

June 26, 2011, 12:54 am

The National Association of Home Builders (NAHB) supported a five-year extension of the National Flood Insurance Program (NFIP) before the Senate Banking Committee.

Barry Rutenberg, first vice chairman of NAHB and a home builder from Gainesville, Fla., told lawmakers that NFIP’s recent series of short-term extensions has created a high level of uncertainty in the program, and that has caused severe problems for the nation’s already troubled housing markets.

“Unfortunately during this latest interruption, many homebuyers faced delayed or cancelled closings due to the inability to obtain NFIP insurance for a mortgage,” said Rutenberg. “In other instances, builders themselves were forced to halt or postpone construction on a new home due to the lack of flood insurance approval, adding unneeded delay and job loss. NAHB believes a long-term extension will ensure the nation’s real estate markets operate smoothly.”

The current reauthorization of the program expires on Sept. 30.

While NAHB supports NFIP reforms, Rutenberg also urged lawmakers to proceed with care. Congress could take steps to bolster the program’s balance sheet could also have unintended consequences, such as increasing the cost of housing.

In its testimony, NAHB supported several reforms:

• Create a more expansive “deluxe” flood insurance option or a menu of insurance options from which policyholders could pick and choose.

• Raise the minimum deductible for paid claims to give homeowners a strong incentive to mitigate and protect their homes, thereby reducing potential future losses to the NFIP.

• Establish a Technical Mapping Advisory Council, as seen in House bill H.R. 1309, to ensure the scientific validity of Flood Insurance Rate Maps.

• Keep the Special Flood Hazard Area and any mapping to the 100-year flood level (1 percent annual flood risk), because any expansion would substantially increase the cost of home construction and severely impact housing affordability.

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

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