The Senate on Thursday voted to extend the life of the National Flood Insurance Program for 60 days, giving lawmakers time to work on a long-term extension that would seek to restore fiscal solvency to the debt-ridden plan.
The House last week approved a one-month extension of the program, and the two chambers will have to decide on a common approach before the insurance provider's charter runs out at the end of the month.
The program, started in 1969 to allay federal costs from flood disasters, now covers some 5.6 million policyholders in 21,000 flood-prone communities. Failure to renew it could have consequences for the fragile housing market, because people in flood plains would be unable to obtain flood insurance, preventing them from closing on mortgages.
"If it were to expire, new housing construction would stall, in fact, in many places, just come to a halt, real estate transactions would come to a screaming halt, taxpayers would be on the hook for future disasters," said Senate Majority Leader Harry Reid of Nevada.
The Senate bill passed with an amendment by Sen. Tom Coburn, R-Okla., that eliminates premium rate subsidies for people buying second homes and vacation homes in flood-prone areas.
The House measure passed last week also includes some changes, including taking steps to encourage private-sector participation in the flood insurance market.
Currently, with private insurers unwilling or unable to compete in the market, the federal government handles almost all flood insurance.
The program was largely self-sustaining before 2005, when hurricanes Katrina and Rita forced the program, run by the Federal Emergency Management Agency, to borrow heavily from the Treasury. Currently it owes the Treasury nearly $18 billion.
The House last year passed a five-year extension for the program that allowed for increased premiums and ended some subsidies as means to make the program more fiscally sound. But the Senate has yet to bring a companion bill to the floor for a vote.
Senate Banking Committee Chairman Tim Johnson, D-S.D., said Thursday he planned to move a long-term reauthorization of the program to the Senate floor. That could take place next month.