A government shutdown will fuel the flood-insurance crisis

The idiom "kicking the can down the road" has been used so many times about the National Flood Insurance Program that the NFIP itself could probably replace the cliche as an analogy for procrastination: "I did an NFIP and got an extension on my taxes."

The Federal Emergency Management Agency’s flood-insurance program will lose funding after Tuesday unless Congress can agree on a new budget that includes a temporary authorization lasting all the way until … Nov. 21. At that point Congress will have to rear its foot back for yet another punt. As of this writing, there have been 33 such temporary reauthorizations since 2017. A 34th and 35th will do nothing to solve the program’s deep-rooted problems, which are only growing more urgent and expensive as the planet gets hotter.

Letting the NFIP lapse might help focus minds on fixing it but at a steep cost: People who already have NFIP coverage will keep it, but new homebuyers won’t be so lucky. About 1,360 home sales a day, or 41,300 a month, are in FEMA flood zones and need flood insurance to get a mortgage, according to the National Association of Realtors. The vast majority of those homebuyers turn to the federal flood plan. Every day the NFIP is out of commission potentially represents hundreds of millions of dollars in failed home closings.

Only 4% of U.S. homeowners have any sort of flood insurance, even though 99% of U.S. counties have flooded in the past 30 years, according to FEMA. Flood risks are only rising as the climate warms, making hurricanes and other storms more destructive. Even formerly mundane thunderstorms now dump much more water than they once did, thanks to the laws of physics, which dictate that hotter air holds more water.

Many homeowners might skip flood insurance to avoid the extra premium of about $1,000 a year. But all it takes is one minidisaster to make the investment worthwhile: An inch of flooding can do $25,000 worth of damage to a house, according to FEMA.

The general lack of flood insurance is a big part of a broader crisis of underinsurance in the U.S. Up to $2.7 trillion in housing wealth could disappear if the gap between market values and catastrophe-risk-adjusted values closed overnight, according to one estimate. Seldom has this gap been more evident than in Asheville, North Carolina, last year, where less than 1% of homes hit by Hurricane Helene had flood insurance.

A stronger insurance system would go a long way toward erasing that gap. Not only should President Donald Trump and Congress pass a full, long-term NFIP reauthorization this year, they should also pass reforms that strengthen the program for the long haul.

Maybe most important, FEMA’s flood maps desperately need updating to reflect a changing climate. Nearly a third of NFIP claims come from outside FEMA’s high-risk zones, which strongly suggests those zones must be expanded. New maps should not only cover much more of the U.S. but also reflect the rise in all kinds of flood risks, including the increasing number of biblical downpours that can swamp houses far from traditional flood zones, as NAR President Kevin Sears noted in a letter this month to Senators Cory Booker of New Jersey and Bill Cassidy of Louisiana. Sears’ letter — in response to Booker and Cassidy’s request for public input about NFIP reform — included other good ideas, including helping homeowners invest in flood resilience and fostering the spread of private insurance.

FEMA should also stop looking to historical records to calculate future flood risk, given how quickly and drastically the climate is changing. At the moment, the law requires FEMA to study updating its maps every five years but not to actually update the maps. That should change.

A reformed NFIP, which at last count owed the Treasury Department $22.5 billion, also needs to be financially sound. That will involve a tricky balancing act of boosting homeowner uptake to expand the risk pool while raising enough money to cover claims. The latter goal typically requires raising premiums, which doesn’t exactly help with the former goal. Subsidizing homeowners is politically risky and possibly self-defeating if done incorrectly, but it may be necessary to help low-income homeowners in lower-risk areas obtain coverage. Rewarding homeowners for steps they take to mitigate their flood risk will help, too. My colleague Jonathan Levin has suggested automatically bundling flood insurance with property taxes, which would make homeowners opt out for other options.

At the moment, rather than working on NFIP reform, Trump is winding down FEMA altogether without offering a plan for the NFIP’s future. Given how much FEMA supports the program, simply shifting it to, say, the Department of Housing and Urban Development wouldn’t work without extensive transition planning. (It doesn’t help that Trump also wants to gut HUD’s budget.) Trump is also attacking FEMA grants and other federal programs that help communities withstand floods, making future disasters more expensive than they have to be.

But that’s usually how it goes when you fail to plan and are forced to procrastinate as a result: Doing the work today is always cheaper and easier than doing it later. As the climate changes, "pulling an NFIP" is a sure way to make homeowners and the economy suffer.

This column reflects the personal views of the author and does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners. Mark Gongloff is a Bloomberg Opinion editor and columnist covering climate change. He previously worked for Fortune.com, the Huffington Post and The Wall Street Journal.