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Mitigation key for flood program reauthorizations

Reproduced with permission from Daily Report for Executives, 66 DER (Apr. 6, 2016). Copyright 2016 by The Bureau of National Affairs Inc. (800-372-1033),
WASHINGTON – April 7, 2016 – Mitigation is key to bringing the high cost of flood insurance to an affordable yet fiscally responsible level, said Realtors, wildlife advocates and taxpayer advocates.
During an April 5 press call, the National Association of Realtors® (NAR), Taxpayers for Common Sense and the National Wildlife Federation said that, while the National Flood Insurance Program (NFIP) is in need of a number of overhauls, getting the program’s overall spending under control is contingent on lowering the amount of money it needs in the first place. NAR and the other groups have not always seen eye-to-eye but agreed on what changes the NFIP needed, the groups said.
“It looks like we have a million homes in the system that need mitigation,” Maria Wells, broker/owner with Lifestyle Realty Group, leader of the Insurance Committee for the National Association of Realtors, said on the call. “What we are trying to figure out here is doing pre-storm [mitigation] versus post-storm [recovery] without costing the government money.”
The NFIP is $23 billion in debt and policymakers and other stakeholders are all commenting on what Congress should change when it reauthorizes the program before it expires in September 2017.
The groups on the call suggested retooling the high rate subsidies to be fiscally responsible, privatizing part of the flood insurance market, increasing the pool of participants in the program, and perhaps most important in avoiding recurring costs, better pre-disaster mitigation spending. A common method of mitigation is to build structures a few feet higher off the ground, limiting the amount of water that can get in during a flood.
Advocates of smarter mitigation spending have pointed to research showing $1 of pre-disaster mitigation spending is equivalent to $4 in disaster recovery spending.
Backwards trigger
Money for disaster mitigation is already in the program, but existing triggers for administering it limit its effectiveness, a source familiar with the real estate industry told Bloomberg BNA after the call.
A part of the NFIP called the Increased Cost of Compliance (ICC), for instance, does make funds available for mitigation, but only after a flood has taken place, the source said. Groups like NAR would like to get a trigger like that flipped, so the mitigation dollars could be allocated before a flood and actually limit damage, the source said.
But in some cases, mitigation may still prove too costly for the most flood-prone properties, and it may just make more fiscal sense to pay property owners to live elsewhere, a process known as a buyout, NAR’s Wells said on the call.
As for getting the private market to take on more flood risk, Wells said private insurers could probably do a better job than the federal government at getting people to sign up and keep paying for their coverage, in theory raising the ratio of income versus payouts in the flood insurance market.
“We need to get more people covered with flood insurance, and right now we’re having people drop out of the program, and we’re not sure what that is for,” Wells said.
Checking expectations
While the reauthorization is important, people shouldn’t expect much concrete action this year beyond a rough draft of the NFIP reauthorization bill that Rep. Blaine Luetkemeyer (R-Mo.), chairman of the House Financial Services Housing and Insurance Subcommittee, said he’s working on with members, the group said.
Looking at what happened leading up to the most-recent reauthorization in 2009, “[T]here were 17 short-term extensions, [and] some lapses over a 3-year period, until you actually got to reauthorizations,” Steve Ellis, vice president, Taxpayers for Common Sense said on the call. Stakeholders really dislike the idea of a similar process happening this time, he said.
“On the other side, recognizing that we’re in an election year, at some point this year, everything is going to stop in Congress,” Ellis said. “It would be helpful to have something on the table where they can pick up running [with the draft bill] in 2017.”
Copyright © 2016 by The Bureau of National Affairs Inc. (800-372-1033), Reporter Brandon Ross, Editor Heather Rothman.
Source: Florida Realtors Feed

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