Function 450 - Community and Regional Development
Change the National Flood Insurance Program
CBO periodically issues a compendium of policy options (called Options for Reducing the Deficit) covering a broad range of issues, as well as separate reports that include options for changing federal tax and spending policies in particular areas. This option appears in one of those publications. The options are derived from many sources and reflect a range of possibilities. For each option, CBO presents an estimate of its effects on the budget but makes no recommendations. Inclusion or exclusion of any particular option does not imply an endorsement or rejection by CBO.
Under this option, the federal government would stop offering discounted rates to households that bought insurance through the National Flood Insurance Program for "pre-FIRM" properties—that is, properties constructed before their community's first flood insurance rate map (FIRM) was created. The option would also eliminate an annual surcharge of $25 for primary residences and $250 for other properties. To replace the collections forgone by eliminating the surcharge, the option would increase the reserve fund assessment, which is currently set by the Federal Emergency Management Agency at 15 percent, to 23 percent. CBO estimates that implementing those changes would reduce spending by $1.3 billion over the 2019–2028 period. Those savings are uncertain, because two related factors are likewise uncertain: the number of pre-FIRM properties that would have received discounted rates in the absence of the changes and the way the changes would affect the number of property owners who chose to purchase insurance through the National Flood Insurance Program.