Shutdown Slows Florida Flood Insurance, Home Sales

TALLAHASSEE, Fla. — Two weeks into the government shutdown, Florida’s Realtors® – and home buyers and sellers – are starting to feel the impact.

Without an open and functioning federal government, homes in flood zones that are required to get a flood insurance policy largely cannot, which can delay or freeze home sales. That’s because the federal government is the largest provider of flood insurance policies through the National Flood Insurance Program.

In FEMA-designated flood zones, banks require flood insurance before they will extend a mortgage. But during the on-going government shutdown, the NFIP cannot write new policies or renew current ones. And neither side in Washington has indicated a compromise is soon coming.

Tim Weisheyer, Florida Realtors® president and broker-owner of Dream Builders Realty and dbrCommercial Real Estate Services, said he recently spoke with a Realtor in Florida whose buyer had to scramble to find cash to complete a home purchase after the bank denied their mortgage due to lack of flood insurance. A cash buy eliminates the flood insurance requirement.

“Ultimately, they were not able to get flood insurance, not able to get loans underwritten. The agent had to negotiate multiple extensions and variables with both buyers and sellers,” he said. “It’s costing them a lot of money and a lot of energy and frustration.”

In this case, the buyer was able to borrow enough money from family members to buy the home in cash – with plans to take out a mortgage when the government opens again.

“That’s not the norm,” said Weisheyer. “Most people can’t call three, four, five family members and pull that together. For so many others it just means transactions get delayed.”

The National Association of Realtors® estimates that about 1,400 transactions per day nationwide could be impacted due to the government shutdown, but most of those impacts kick in after the 30-day mark. That’s when current owners can no longer transfer their flood insurance policy to a new buyer, a loophole that is easing some of the stress of the moment right now, he said.

Florida does have a small and growing private flood insurance market that can – in some cases – be cheaper than the heavily subsidized government insurance program. But more often in Florida, the spots with a higher flood risk are only able to access federal policies.

In the meantime, flooding is still happening across the county. Experts say current policyholders could see delays getting their claims addressed.

“As we’re seeing from Alaska and California to the Eastern Seaboard, severe weather and flood risk don’t shut down just because the government does,” said Jimi Grande, senior vice president of federal and political affairs for the National Association of Mutual Insurance Companies in a statement. “Americans are at risk of losing their homes and possessions to flooding because of Congress’ failure to fulfill one of its most basic job responsibilities: fund the government.”

NAMIC and other real estate organizations have urged Congress to reach a deal to re-open the government or at least pass a bill that just extends the NFIP. Florida Congressman Jimmy Patronis filed a bill shortly before the shutdown that would extend the NFIP through 2026 with no changes; a bill that Florida Realtors said it fully supports.

“We are still in hurricane season. We’ve been fortunate thus far, but it’s reckless to run the risk of NFIP not being an option and not being available for a storm,” Weisheyer said.

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