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A woman is evacuated by airboat from the Hurricane Harvey floodwaters in Houston, Texas, U.S. August 29, 2017. REUTERS/Rick Wilking - RTX3DWOC

Can Congress fix the troubled federal flood insurance program?

As the largest flooding event in modern U.S. history affects millions across Texas, members of Congress face a political crisis over how to handle the nation’s largest insurance plan for floods.

The National Flood Insurance Program (NFIP) was put in place in 1968 as private flood insurance became more expensive and less available to homeowners in flood-prone areas. But it’s set to expire Sept. 30.

It offers insurance to homeowners, renters and businesses in high-risk zones, and asks communities to develop plans to reduce flooding risks.

But flooding risks have changed rapidly in the last 50 years, and the federal government and local communities have struggled to keep up. Flood maps are out of date. Cities are becoming more flood prone; so are coastlines. As a result, the program has several major problems:

  • It is now $24 billion in debt, largely due to benefits paid out in connection with Hurricanes Katrina and Sandy.
  • The program loses more than $1 billion annually.
  • NFIP faces a particular burden in the form of thousands of “repetitive loss” properties. Properties that have claimed repeated flood damage represent just 1 percent of properties insured under the program, but they get 25 to 30 percent of its funding.

READ MORE: The latest on Hurricane Harvey and how you can help

These issues have led some Republicans to push for reforms to the flood program. House Financial Services Chairman Jeb Hensarling, R-Texas, wants to move away from insuring homes in the highest risk zones. Other Republicans strongly disagree with Hensarling’s reforms and instead want to decrease flood insurance premiums.

The debate sets up another potential stand-off in September.

What happens if the program expires? The most immediate effects would be on real estate, as buyers required to obtain flood insurance could have trouble finalizing sales. In the meantime, the program will face more scrutiny as the victims of Hurricane Harvey move forward with the recovery process in the weeks to come.

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