Homeowners throughout flood-prone regions of America are enrolled in the federally backed National Flood Insurance Program (NFIP), which reportedly aims to reduce the impact of flooding on private and public properties by providing affordable insurance to owners.
In America today, some 3.1 million parcels of land are covered by FEMA’s NFIP, which provides more than 90% of the nation’s flood insurance policies. The program and its $21 billion debt to the U.S. Treasury (per Reuters, 2023) has been a topic of debate during an era marked not only by a dearth of housing, but also increases in flood-producing weather events.
Researchers at the Congressional Budget Office, in a 2024 study, requested by House Financial Services Committee member Rep. Maxine Waters, found that waterfront vacation homeowners were 50% more likely to be covered by discounted NFIP insurance than those in less affluent inland communities.
Rep. Waters calls those findings “unfortunate” because it means that “our nation’s taxpayers are taking on double the risk for vacation home communities,” Rep. Waters said in a statement. Last year, she raised concern that families across the country who are affected by increased flood disaster “cannot afford to pay the price of the current instability of the NFIP.”
CBO reported that the higher a community’s median household income, the smaller the share of properties at risk of flooding, the larger the share of at-risk properties covered by an NFIP policy.
Those higher-income households also received more premium discounts among properties with coverage compared to properties at risk in communities where median household income was lower, the report revealed.
The report supported Waters’ “vacation homes” statement. It determined that secondary, coastal residences were more likely to be covered by NFIP policies—and to be covered by policies with premium discounts—compared to inland, primary residences.
The CBO found that most properties facing flood risk are located outside of the NFIP’s special flood hazard areas (SFHA). In fact, a 2023 CBO study showed almost half of anticipated flood damage to homes with federally-backed mortgages were located in areas where homeowners are not required to carry flood insurance, and are therefore less likely to purchase policies.
For purposes of its recent studies, the CBO considered properties to be at risk of flooding if data (provided by First Street Foundation) show they have at least a 1% annual probability of experiencing a flood of a depth of at least one foot, which is equivalent to having about a one-in-four chance of experiencing at least one over a period of 30 years.
Among the 9% U.S. properties the agency considered at risk, about 92% were not covered by an active NFIP policy at the start of May 2023.
Waters said in a statement that CBO’s report details the “extent to which certain vulnerable communities are left behind” and “bolsters our efforts to reform and reauthorize the NFIP.”
Waters sponsored a bill, The Housing Crisis Response Act, that includes a provision to cancel NFIP debt and redirect interest payments, a move she says will “modernize and improve flood mapping to better account for risks and ensure that all communities are covered.”
Concerns related to anticipated increased flood damage are backed by the 2023 CBO analysis. That “Flood Damage and Federally Backed Mortgages in a Changing Climate” report projected total expected flood damages to reach up to $258 billion over a 30-year period by 2050 for homes with mortgages that are backed, insured, or guaranteed by Fannie Mae and Freddie Mac, the Federal Housing Administration (FHA), and the Department of Veterans Affairs (VA).
The House last February passed short-term reauthorization of the NFIP. Waters pointed to a pattern of short-term fixes since 2012 that leave the NFIP at “repeated risk of lapse.” Along with other members of congress, she is calling for long-term reauthorization and reform of the program.
To view the full report from the nonpartisan Congressional Budget Office, “Flood Insurance in Communities at Risk of Flooding,” visit coo.gov. For Congresswoman Maxine Waters’ full press releases visit the website of the U.S. House Committee on Financial Services-Democrats.
