Hurricane Harvey Could Spur Legislative Action on Flood Insurance

As Hurricane Harvey continues to bring feet of rain and further flooding to Houston, Texas, Congress returns next week and must either quickly reauthorize or pass a short-term extension for the National Flood Insurance Program (NFIP), which expires September 30th.

NFIP was created in 1968 to provide flood insurance to residents of flood-prone areas, as federally required. It remained largely solvent until the expenses of Hurricanes Katrina and Sandy and several “billion-dollar event” floods in 2016 burdened it with more than $24 billion in debt. The House Financial Services Committee, led by Chairman Jeb Hensarling (R-TX), has worked on reform efforts since early last year, and the committee advanced seven flood insurance proposals earlier this summer to reform and reauthorize the program for five years. The seven measures combined would address almost every aspect of the program, including financing, privatization, mitigation, and mapping. They must still be packaged together and scheduled for a vote by the full House, but the bills face significant opposition.

On the other side of the Hill, Senate Banking Chairman Mike Crapo (R-ID) and Ranking Member Sherrod Brown (D-OH) released in July bipartisan legislation to fund NFIP for six years and create new community risk mitigation procedures. The measure, which follows other Senate flood insurance bills from Senators Bill Cassidy (R-LA), Kristen Gillibrand (D-NY), Shelley Moore Capito (R-WV), and John Kennedy (R-LA) (a 10-year reauthorization), as well as Senators Bob Menendez (D-NJ), John Kennedy (R-LA), Elizabeth Warren (D-MA), Marco Rubio (R-FL), Chris Van Hollen (D-MD), Thad Cochran (R-MS), Cory Booker (D-NJ), Bill Nelson (D-FL), Bill Cassidy (R-LA), and Jack Reed (D-RI) (another six-year reauthorization), and numerous hearings on the issue this year already, is expected to serve as a starting point for consideration by the whole committee. The Senate Banking Committee will also consider relief for community and regional banks under Dodd-Frank, as well as housing finance reform and potentially a portion of an infrastructure package, but these issues are now almost certain to move to next year as flood insurance is on the clock.

In light of the events in Houston, Chairman Hensarling has remained steadfast in his support for broad reform, while other members of Congress and staffers working closely on the issue have indicated that a short-term extension without significant modifications is becoming more likely. With months remaining in hurricane season, Congress faces increasing political pressure to extend the program as quickly as possible. As a result, while committees on both sides of the Hill work through their flood insurance differences, we are likely to see a patch for a couple of months, perhaps even rolled into a continuing resolution along with disaster relief funding and some of the other provisions that expire at the end of September.