A coalition of housing organizations have sent a letter to Speaker of the United States House of Representatives Rep. Mike Johnson, Rep. Chuck Schumer, Rep. Hakeem Jeffries, and Rep. Mitch McConnell urging Congress to redouble their efforts and support the ability to pursue the American Dream of property ownership and access to quality rental housing by extending the authority of the National Flood Insurance Program (NFIP) and ensuring other vital housing programs do not lapse on November 17.
The coalition of housing industry organizations included the National Association of Realtors (NAR), Community Home Lenders of America, Housing Policy Council, Leading Builders of America, Manufactured Housing Institute, National Apartment Association, National Association of Home Builders (NAHB), National Housing Conference, National Multifamily Housing Council, Mortgage Bankers Association (MBA), and U.S. Mortgage Insurers.
An impending government shutdown on November 17 would disrupt the purchase and renewal of flood insurance in more than 20,000 communities across the country. NAR estimates an extended lapse of the NFIP’s authority could threaten 1,300 property sales each day, as buyers lose financing or are forced to pay fees to hold interest rates.
In early October, as the NFIP was just hours away from its termination deadline, House and Senate lawmakers have approved a bipartisan measure—H.R. 5860, the Continuing Appropriations Act, 2024 and Other Extensions Act—to continue to fund the NFIP for an additional 45 days through mid-November. The NFIP’s last multi-year reauthorization expired on September 30, 2017, and since then, the NFIP has been extended 22 times (23 times as of today) and was allowed to briefly lapse on three occasions.
Managed by FEMA, the NFIP is delivered to the public by a network of more than 50 insurance companies and NFIP Direct.
“We are deeply concerned about the impact on the NFIP, as a government shutdown would disrupt the purchase and renewal of flood insurance in more than 20,000 communities across the country,” said the letter. “Not only would Americans be unable to purchase new NFIP policies during a lapse, but residential, commercial, and rental property owners and renters currently insured by the NFIP similarly would be unable to renew their policies or purchase new ones, which is required when utilizing any federally backed mortgage product. Without access to the NFIP, property owners of all kinds, including millions of American families would be forced to rely on severely limited or cost-prohibitive private market flood insurance products or, worse, federal disaster aid.”
Flood insurance is not the only program at risk. Several housing financing programs like USDA’s rural housing loans, FHA multifamily programs, FHA’s Title 1 manufactured housing loans, reverse mortgages, and other housing related programs would be unavailable during a government shutdown, resulting in fewer affordable options for prospective home buyers in an already tight housing market.
Averting a shutdown will prevent these disruptions to the real estate, home building, and mortgage lending sectors, which make up more than 20% of the U.S. economy. It will also protect Americans from the most common and costly natural disaster in the country: flooding.
NAR recently unveiled its state flood disclosure tracker tool, as the association worked with the Legal Research Center to conduct a complete, thorough, and accurate survey of existing state disclosure requirements. NAR’s tracker aims to educate the public and Congress as it considers the Federal Emergency Management Administration's (FEMA) legislative proposals to reform NFIP, including the unnecessary and misguided disclosure form proposal.
Under the proposed legislation, to qualify for the NFIP, states would be required to mandate a real estate-related disclosure form with specific flood-related questions. If passed, all but one state would be required to make significant amendments to its laws and regulations, significantly increasing states' administrative and enforcement burden for a limited benefit to homeowners, buyers, or renters. Based on the research done by the Legal Research Center, all 50 states and D.C. already require the disclosure of known material property conditions or facts, including prior flood damage. Most states have added flood-related disclosure forms and requirements developed by local authorities with unique knowledge and expertise, benefitted from decades of court decisions and interpretations of common law, and have been tailored to meet state-specific flooding concerns and enforcement.
"America's 1.5 million Realtors are in the business of streamlining processes to best serve all current and future homeowners across this country," said Tracy Kasper, President of NAR. "The proposed legislation would add unnecessary red tape to an already complex purchasing and selling process. Our research has found that every single state has flood disclosure requirements, and there is no need to have federal government involvement in a practice that each state knows how to handle best. The proposed FEMA form would not be useful to buyers and duplicative for sellers, virtually having them check the same box on a different form."
NAR engaged the Legal Research Center, which has decades of legal research and real estate expertise, to identify all flood disclosure requirements not identified in FEMA's study supporting this proposal.
"Our research reveals that states have a long history of tailoring and enforcing their respective disclosure requirements to meet state-specific flooding concerns. The FEMA study solely considers whether specific questions are asked on a required disclosure form and ignores existing state laws, regulations, and court rulings addressing flood disclosure requirements. A one-size-fits-all approach of a federally-required form fails to address local needs," said Kevin Ritchey, CEO of the Legal Research Center.