A looming government shutdown, combined with critical deadlines for disaster preparedness funding and federal flood insurance, threatens to leave thousands of Americans exposed to devastating flood losses and halt countless real estate transactions.
The National Flood Insurance Program (NFIP), which is the primary source of flood damage coverage for most U.S. residents, expired precisely as the federal government faced a funding crisis. This synchronized lapse means homeowners cannot renew existing flood policies, leaving them vulnerable to future floods. Additionally, new policies, mandatory for federally backed mortgages in flood-prone areas, cannot be issued. While policies not yet due for renewal remain active, and ongoing claims will eventually be paid, delays are expected.
The NFIP currently provides over $1 trillion in coverage to approximately 4.5 million homeowners, renters, and businesses. The last time the program expired for a month in 2010, it froze the sale of more than 40,000 properties, according to the National Association of Realtors, highlighting the potential economic ripple effects.
An image shows the Canyon fire raging in Hasley Canyon, California, last month. (Credit: Marcio Jose Sanchez/Associated Press)
The challenge is compounded by the escalating threat of natural disasters. Flooding, both coastal and inland, is an increasing concern across the United States, directly linked to heavier rainfall and rising sea levels exacerbated by climate change.
Simultaneously, as hurricane season ramps up in the Atlantic and wildfires continue to burn fiercely in the Northwest, the government’s primary account for disaster response and recovery is dangerously low. A Federal Emergency Management Agency (FEMA) report from September 16 projected its balance would drop to a mere $2.3 billion by the end of the month. When funds are this scarce, federal disaster spending is typically restricted to only “lifesaving and life-sustaining activities.”
While a federal budget passed in March allocated $22.5 billion for disaster relief through September, the fund’s balance frequently dips low this time of year but is usually topped up without issue. This year, however, political gridlock is making replenishment uncertain.
Despite the broader shutdown, FEMA’s direct disaster response operations would largely continue unaffected. Roughly 84 percent of its 25,000 employees are exempt from shutdown-related furloughs, as noted in a Homeland Security Department memo.
An image depicts homes in Fairview, North Carolina, in October 2024, showing extensive damage from flooding and landslides caused by Hurricane Helene. (Credit: Mike Belleme for The New York Times)
Lawmakers could address the flood insurance program and disaster funding independently, or integrate a solution into a broader budget agreement. Worryingly, one proposed House budget did not include any new appropriations for disaster relief.
On Capitol Hill, efforts to extend the flood insurance program have stalled. An April House bill aimed to reauthorize the program through 2026, while a more recent proposal sought only a short extension into November.
The White House has not yet provided comment on the situation. Over the last decade, Congress has extended the flood insurance program nearly three dozen times. It currently carries a debt of more than $20 billion to the U.S. Treasury, a consequence of surging floodwaters and increased coastal development.
Senators Cory Booker (D-NJ) and Bill Cassidy (R-LA) are actively working on legislation to reform the NFIP. Senator Cassidy emphasized the urgency, stating, “It is irresponsible for Congress to continue to make families hold their breath and hope the rug will not be pulled out from beneath them. It is a pattern that should end.”
Proposed reforms include redrawing floodplain maps to accurately reflect expanding flood risks and encouraging more property owners to join the program. However, high flood insurance premiums currently deter participation, according to Douglas Quinn, executive director of the American Policyholder Association, a non-profit watchdog.
“If you put somebody in a position where they’ve got to choose between an insurance premium or putting food on the table, they’re going to feed their family,” Quinn remarked.
A statement on FEMA’s website indicates that the Trump administration supports “bold steps” to strengthen the NFIP’s finances and secure its future, acknowledging the severity of the challenge. “The level of damage from recent catastrophic storms makes it clear that FEMA needs a holistic plan to ready the nation for managing the cost of flooding under the NFIP,” the statement concludes.