As Congress faces a looming deadline to fund the government, the National Flood Insurance Program (NFIP) could be directly impacted if lawmakers fail to act. The program, managed by the Federal Emergency Management Agency (FEMA), will be unable to issue new policies or renewals in the event of a shutdown, creating challenges for homeowners and real estate transactions nationwide.
Potential Coverage Lapses
If the shutdown extends for a prolonged period, people whose NFIP coverage is scheduled to lapse may find themselves without flood protection. Austin Perez, senior policy representative for insurance issues at the National Association of Realtors (NAR), emphasized the concern: “The main concern is whether buyers will have coverage if a flood occurs and whether FEMA will have sufficient funds to pay claims.”
NAR President Kevin Sears, in a letter to congressional leaders, warned that “1,400 property sales each day could be forced to move forward and go bare without the protection of flood insurance, depending on lender approval.” He added that without access to flood insurance, families may be left to rely on limited federal disaster aid.
Impact on Real Estate Transactions
Delays are expected for some real estate sales, especially in areas where flood insurance is required. Andy Winkler, managing director of housing and infrastructure policy at the Bipartisan Policy Center, explained, “If they don’t extend that NFIP reauthorization, historically, that means that home sales in places that require flood insurance are usually delayed.”
While most regulators suspend insurance requirements during NFIP lapses, allowing transactions to proceed, those properties may still be at risk if a flood occurs without coverage. Perez of NAR noted that “NFIP lapses complicate home sales, but most transactions can still move forward without flood insurance.”
Grace Period and Alternatives
According to Amanda Devecka-Rinear, co-founder of the New Jersey Organizing Project, homeowners have a grace period. However, she warned that a lengthy shutdown could leave people uninsured “when a storm or flood hits.” Private flood insurance remains available, though it currently makes up only a small portion of the overall market.
FEMA Disaster Relief Fund at Risk
Beyond the NFIP, FEMA’s Disaster Relief Fund (DRF) could also face strain if the shutdown drags on. As of August 31, the DRF held $10.1 billion — $8.9 billion earmarked for presidentially declared disasters and $1.2 billion in base funding. Former FEMA chief of staff Michael Coen described the balance as concerning, noting that major disasters, such as the 1994 Northridge earthquake, can consume billions within days.
If the DRF runs out, disaster response operations would continue, but longer-term rebuilding could be delayed without new congressional appropriations. Winkler noted that FEMA has slowed DRF spending in recent months, which “puts it in a slightly better position coming into a government shutdown situation than I would have said even just a couple of months ago.”
Political Context
The funding debate comes as Democrats push to tie government spending to measures aimed at lowering health care costs. With GOP majorities in both chambers of Congress and a Republican president in the White House, the standoff could result in a shutdown if an agreement is not reached. The administration has also threatened additional federal workforce cuts if Democrats do not agree to a straightforward funding extension.
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