As of midnight October 1, the federal government has shut down after a deadlocked Congress failed to reach a deal on funding.
And as of midnight, the National Flood Insurance Program (NFIP) has officially lapsed as the Federal Emergency Management Agency (FEMA) can no longer write new or renew existing flood insurance policies, leaving nearly five million properties nationwide at-risk at the height of hurricane season.
“A government shutdown can have a profound impact, particularly on consumers actively in the process of purchasing their dream home where flood insurance is required, and it’s happening at a critical moment during hurricane season,” said John Dickson, President and CEO of Aon Edge, a provider of private flood insurance.
A History of Flood Protection
The NFIP is managed by FEMA and is delivered to the public by a network of more than 47 insurance companies and NFIP Direct. The NFIP provides flood insurance to property owners, renters and businesses, and having this coverage helps them recover faster when floodwaters recede. The NFIP works with communities required to adopt and enforce floodplain management regulations that help mitigate flooding effects. Flood insurance is available to anyone living in one of the 22,600 participating NFIP communities. Homes and businesses in high-risk flood areas with mortgages from government-backed lenders are required to have flood insurance.
Most existing flood insurance policies under NFIP remain active, and include a 30-day grace period, and can be transferred to new owners. NFIP claims will continue to be paid, but uncertainty grows the longer the shutdown lasts—especially regarding how long buyers may go without coverage and how quickly FEMA’s claims paying funds could be depleted.
According to the Insurance Information Institute, the NFIP covered more than 5.7 million policies at its peak in 2009, and by 2021, that number fell to 4.95 million as private insurers began offering more comprehensive coverage.
“According to NAR [National Association of Realtors] research, the NFIP supports roughly half a million home sales annually, generating one million jobs, and contributing $70 billion to the U.S. economy,” said Shannon McGahn, EVP and Chief Advocacy Officer for the National Association of Realtors (NAR). “Each day that passes during the shutdown, potential real-life impacts will be felt in America’s housing market, which accounts for nearly 20% of the U.S. economy. That is why NAR urges Congress to reach a funding agreement to reopen the government, while we also continue to advocate for a stable, long-term reauthorization of the NFIP so that families, businesses, and markets can move forward with more certainty.”
Since the end of Fiscal Year 2017, Congress has passed 33 short-term NFIP authorization extensions, which have been attached to various government funding bills.
NFIP’s Impact on the Overall Market
NAR estimates that the NFIP is essential to 1,360 home sale closings daily, translating to approximately 41,300 affected monthly transactions nationwide. Regionally, NAR estimates that Florida’s housing market will be the most impacted by any long-term lapse in the NFIP, as nearly 14,900 home sale closings monthly in the Sunshine State depend on the NFIP. The NFIP provides certainty for another 3,590 and 1,680 home sale closings in Texas and California, respectively each month.
“Home sales in flood-prone areas could stall almost immediately,” said Realtor.com Senior Economist Anthony Smith. “New purchases are at risk, potentially freezing deals and creating ripple effects for real estate agents, mortgage lenders, and title companies.”
Earlier this year, NAR examined the impact of the NFIP on homebuyers, home sellers, and the overall economy. Now that a shutdown is in effect and the cancelation of the NFIP is a reality, NAR estimated that without the NFIP, total income losses could reach $69.7 billion per year, a figure that is approximately equal to Alaska’s Gross Domestic Product (GDP). NAR research found that without the NFIP, Florida ($23.0 billion), California ($5.5 billion), and Texas ($4.9 billion) lead the nation with the largest local income losses per year.
“The shutdown is likely to constrain the pool of potential homebuyers, especially those reliant on federally backed loans or related services,” said Cotality Chief Economist Dr. Selma Hepp. “Applicants for FHA, VA, or USDA loans—which account for about one-quarter of all mortgage applications—may encounter significant processing delays due to agency furloughs. The USDA has already implemented a moratorium on new loans and has postponed scheduled closings. Additional requirements, such as IRS and Social Security verifications, are disrupted, while employment verification for federal workers becomes increasingly challenging. Although mortgage rates may experience a slight decrease due to increased demand for Treasury bonds, ongoing uncertainty and operational difficulties may deter prospective buyers. In areas prone to flooding, suspension of the National Flood Insurance Program could impede property transactions. Overall, the shutdown introduces delays and uncertainty, increasing barriers for first-time buyers and those with limited financial flexibility.”
Troubling Timing
And the timing of the government shutdown could not come at any worse time, as homeowners in the southeastern U.S. prep for the impending arrival of Hurricane Imelda. The continental United States has largely been spared from major impacts so far during the 2025 hurricane season, which generally runs from June 1-November 30. Several storms have formed and have tracked across the Atlantic basin, but most have either stayed out to sea or weakened before reaching land. Imelda is the ninth named storm of the 2025 Atlantic hurricane season, having formed Sunday in the western Atlantic.
Following an intense hurricane season in 2024, experts have projected above-average storm activity this year. According to forecasts from National Oceanic and Atmospheric Administration (NOAA) and North Carolina State University (NCSU), warmer-than-average Atlantic waters and shifting El Niño–Southern Oscillation (ENSO) conditions will contribute to heightened risk across key coastal states.
“There are two full months between today and the end of Hurricane season, and every day more and more Americans will be needlessly put at risk of losing everything in a flood. We cannot allow this to happen,” said Neil Alldredge, President and CEO of the National Association of Mutual Insurance Companies (NAMIC). “Decades of poor policy decisions—from failing to maintain adequate flood mapping to hidden subsidies that provide a false sense of security and encourage development in flood-prone areas—have put millions of Americans in the path of floodwaters. Many of them, though not enough, wisely chose to protect themselves by purchasing flood insurance through the NFIP. They should not be put at risk because Congress cannot do its job.”
Legislative Action Underway
Congressional action is underway to protect vulnerable homeowners in at-risk areas, as Reps. Troy A. Carter Sr. of Louisiana, Mike Ezell of Mississippi, and Lizzie Fletcher of Texas have introduced bipartisan legislation to reauthorize the National Flood Insurance Program (NFIP) through November 21, 2025, matching the program authorization extension that was included in the September House Continuing Resolution bill. This legislation was filed ahead of NFIP’s federal authorization expiration and government shutdown.
“We cannot allow the dysfunction of government to punish everyday Americans by letting the National Flood Insurance Program lapse, leaving families and businesses without critical protection,” said Rep. Carter. “This program is not only vital to Louisiana but to communities across the nation that face the growing risk of flooding. I have consistently stressed, since filing a long-term reauthorization earlier this year, that NFIP authorizations should not be tied to contentious government funding battles that put homeowners in jeopardy. Instead, we must provide this program with long-term certainty so that Congress can focus on modernizing the NFIP and ensuring it remains affordable and accessible for everyone.”
While this reauthorization ensures short-term stability, it must pave the way for a long-term, comprehensive NFIP reform to modernize the program and strengthen it for future generations. Rep. Carter filed the National Flood Insurance Program (NFIP) Authorization Extension Act in April to extend program authorization through December 31, 2026, and avoid the current situation where a government shutdown threatens NFIP authorization.
“The NFIP isn’t just a policy—it’s a critical safeguard for millions of families, homeowners, and businesses across the country,” said Rep. Ezell. “In Mississippi and other flood-prone areas, this program is often the only thing standing between families and financial devastation. Letting it lapse because of political brinkmanship in Washington would be reckless, irresponsible, and dangerous. A shutdown shouldn’t be allowed to jeopardize disaster recovery, delay home sales, or leave flood victims waiting for the help they desperately need. We must act now to protect our communities and ensure the NFIP remains strong and uninterrupted.”
