With the NFIP’s reauthorization delayed until at least December, there remains a few months to read about potential changes to the program. One such change was described last week in Insurance Journal – the cancellation of NFIP coverage for new homes in the Special Flood Hazard Area (SFHA).
On the list of potential changes to the NFIP, this one is uncontroversial. Almost everyone believes that over-development in floodplains is a bad idea. Not only does it put homes and commercial buildings in floodplains, it also gives those flood waters nowhere to go other than downstream and into more property. Harris County is even taking it one step further and purchasing some flooded homes for demolition before they are repaired. That all sounds very sensible.
Who could possibly disagree? Who would advocate for building more new homes in flood-prone areas?
Builders – that’s who.
Granger McDonald, chairman of The National Association of Home Builders suggests the suspension of federal flood insurance in the SFHA would “harm local communities and impair economic growth.” Yep, he said that NOT building more flood-prone housing would impair economic growth.
And, “It would simply prevent home builders from being able to provide safe and affordable housing.” Yep, he also said that new homes in the SFHA are safe and affordable.
“Why does OMB needlessly propose to penalize new construction?” was his rhetorical conclusion to the interview. Here is why the OMB might penalize this new construction:
- Flooded homes do more harm to local economies than the avoidance of building them. Disaster response and repairs to residential / commercial infrastructure can be debilitating for local communities. Put parks there instead – soccer fields handle flooding better than hard-wood floors
- Homes built near sources of flooding might be affordable…until they need to be repaired every few years
- Floods are not safe
The least communities should insist upon if construction continues in the SFHA is significant mitigation, even though the homes will be way less affordable.
And this proposal only considers NFIP coverage – not private flood coverage. If communities want to keep building homes in the SFHA, because they think it is safe or something, it is important that insurers are able to offer the needed flood insurance to those property owners. The coverage won’t be cheap (sorry Mr. McDonald), but it will help ensure the community’s economic growth is not wiped out by the recovery when the floods do come (again, apologies Mr. McDonald).