National Flood Insurance Program: Fiscal Exposure Persists Despite Property Acquisitions

NFIP has faced significant financial challenges over the years, highlighted by a rise in catastrophic flood events and its $20.5 billion debt to Treasury. Contributing to these challenges are repetitive loss properties—those that have flooded and received a claim payment multiple times. Acquiring and demolishing these properties is one alternative to paying for repeated claims, but questions exist about the cost, efficiency, and effectiveness of this approach.

GAO was asked to review FEMA's property acquisition efforts as a means of addressing NFIP's financial challenges. This report examines (1) funding programs available for acquisitions, (2) FEMA's flood mitigation efforts, and (3) factors contributing to NFIP's fiscal exposure.

To conduct this work, GAO reviewed FEMA guidance and other documentation; analyzed FEMA data sets related to NFIP policies and claims, repetitive loss properties, and mitigation projects; and interviewed FEMA officials.

The Federal Emergency Management Agency (FEMA) administers three grant programs that can fund efforts to mitigate the flood risk of properties insured by the National Flood Insurance Program (NFIP). Together, these three programs funded $2.3 billion in mitigation projects from fiscal years 2014 through 2018. The largest program's funding is tied to federal recovery dollars following presidential disaster declarations, while the other two programs are funded each year through congressional appropriations. States and localities generally must contribute 25 percent of the cost of a mitigation project, but some other federal program funds can be used for that purpose. One example of such a project is property acquisition—purchasing a high-risk property from a willing property owner, demolishing the structure, and converting the property to green space.

From 1989 to 2018, FEMA has helped states and localities mitigate more than 50,000 properties; however, the number of nonmitigated repetitive loss properties (generally meaning those that flooded at least twice in 10 years) has grown. Mitigation efforts varied by state. Property acquisition accounted for about 80 percent of mitigated properties nationwide, but, in some states, elevation (raising a structure) was more commonly used. In addition, some states (e.g., Missouri and North Carolina) mitigated a high number of properties relative to their numbers of repetitive loss properties, while others (Florida, New York, Louisiana, and Texas) mitigated a low number.

While these efforts can reduce flood risk and claim payments, the federal government's fiscal exposure from NFIP remains high because premium rates do not fully reflect the flood risk of its insured properties. NFIP has experienced several catastrophic flood events in recent years, and the frequency and severity of floods is expected to increase. However, NFIP's premium rates have not provided sufficient revenue to pay claims. As a result, FEMA still owed Treasury $20.5 billion as of March 2020, despite Congress cancelling $16 billion of debt in 2017. As GAO has reported in the past (GAO-17-425), Congress will need to consider comprehensive reform, including mitigation and structural changes to premium rates, to ensure NFIP's solvency.

GAO suggested in GAO-17-425 that Congress make comprehensive reforms to NFIP to improve the program's solvency. Given NFIP's continued debt growth, GAO maintains that comprehensive reform warrants consideration.

Congress created the National Flood Insurance Program (NFIP) to  protect homeowners from flood losses, minimize the exposure of  properties to flood damage, and alleviate taxpayers’ exposure to flood  losses. However, as we have previously reported, the program faces a  number of challenges. The magnitude of major flood events since 2005,  combined with attempts to keep policyholder rates affordable, have  resulted in insufficient premium revenue, which threatens the program’s  ability to pay claims over the long term. Compounding these challenges is  a small subset of NFIP-insured properties known as repetitive loss (RL)  properties, which have flooded and received a claim payment multiple  times. These factors have resulted in NFIP accruing billions of dollars in  debt, as the Federal Emergency Management Agency (FEMA) has  repeatedly borrowed from the Department of the Treasury (Treasury) to  pay claims. While Congress cancelled $16 billion of NFIP’s debt in 2017,  as of March 2020, NFIP still owed Treasury $20.5 billion. NFIP has been  on our high-risk list since 2006 because of its financial and management  challenges.

In addition to NFIP, FEMA administers several hazard mitigation  assistance (HMA) grant programs that provide funding to states and  localities to mitigate the flood risk of NFIP-insured properties and  structures, using a variety of methods. One such method is property  acquisition, where FEMA provides funding for the purchase of a property  from a willing property owner, demolishes the structure, and converts the  property to green space. These properties no longer pose a flood risk,  and the green space can alleviate flooding of other properties. As a result,  property acquisition can help reduce NFIP’s fiscal exposure while also  reducing flood risk for homeowners. However, questions exist about the  cost, efficiency, and effectiveness of this approach.

You asked us to evaluate the efficacy of FEMA’s property acquisition  efforts as a means of addressing NFIP’s financial challenges. This report  examines (1) funding programs available for property acquisitions, (2)  FEMA’s flood mitigation efforts, and (3) factors contributing to NFIP’s  fiscal exposure. In a subsequent report, we plan to assess FEMA’s  acquisition process and the extent to which property acquisition is an  effective tool for managing NFIP’s fiscal exposure.

To describe funding programs available for property acquisitions, we  identified HMA programs that fund property acquisition by reviewing  FEMA documentation, legislation, and regulations. We also analyzed how  the programs operate and the mitigation activities they entail. In addition,  we analyzed each program’s annual funding levels from their inception.

To review FEMA’s flood mitigation efforts, we analyzed FEMA HMA data  to determine how many properties FEMA helped states and communities  to mitigate, and the financial resources FEMA provided for flood  mitigation. We analyzed these data by type of mitigation (acquisition,  elevation, floodproof, or relocation), grant program, and state. We also  reviewed FEMA RL property data to assess the number of such  properties, their locations, and the extent to which they have been  mitigated.

To examine factors contributing to NFIP’s fiscal exposure, we analyzed  FEMA’s claims data set and its list of significant flood events. Further, we  reviewed several of our previous reports and Treasury’s statements of  public debt to identify factors that contribute to NFIP’s fiscal exposure and  how the debt has changed over time. Finally, we reviewed available  FEMA, stakeholder, and academic studies on how flood risk has changed  over time and estimates of future trends.

We assessed the reliability of FEMA’s HMA, policy, claims, and RL  property data by testing the data for potential reliability concerns, such as  outliers or missing values. We also interviewed FEMA officials with  knowledge of the data sets and methods used to produce these data. We  determined that all data elements we assessed were sufficiently  appropriate and reliable for each of this report’s objectives.

We conducted this performance audit from January 2019 to June 2020 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.

Background Overview of the National Flood Insurance Program

In 1968, Congress created NFIP, with the passage of the National Flood  Insurance Act, to help reduce escalating costs of providing federal flood  assistance to repair damaged homes and businesses. According to  FEMA, NFIP was designed to address the policy objectives of identifying  flood hazards, offering affordable insurance premiums to encourage  program participation, and promoting community-based floodplain  management. To meet these policy objectives, NFIP has four key  elements: identifying and mapping flood hazards, floodplain management,  flood insurance, and incentivizing flood-risk reduction through grants and  premium discounts. NFIP enables property owners in participating  communities to purchase flood insurance and, in exchange, the  community agrees to adopt and enforce NFIP minimum floodplain  management regulations and applicable building construction standards  to help reduce future flood losses. A participating community’s floodplain  management regulations must meet or exceed NFIP’s minimum  regulatory requirements.

Insurance offered through NFIP includes different coverage levels and  premium rates, which are determined by factors that include property  characteristics, location, and statutory provisions. NFIP coverage limits  vary by program (Regular or Emergency) and building occupancy (for  example, residential or nonresidential). In NFIP’s Regular Program, the  maximum coverage limit for one-to-four family residential policies is  $250,000 for buildings and $100,000 for contents. For nonresidential or  multifamily policies, the maximum coverage limit is $500,000 per building  and $500,000 for the building owner’s contents. Separate coverage is  available for contents owned by tenants. NFIP also offers Increased Cost  of Compliance coverage for most policies, which provides up to $30,000  to help cover the cost of mitigation measures following a flood loss when  a property is declared to be substantially or repetitively damaged.

Through NFIP, FEMA maps flood hazard zones on a Flood Insurance  Rate Map, which participating NFIP communities must adopt. According  to FEMA, floodplain management standards are designed to prevent new  development from increasing the flood threat and to protect new and  existing buildings from anticipated flooding. FEMA has a division  responsible for flood mapping activities and policy and guidance, but stakeholders from various levels of government and the private sector  participate in the mapping process, as appropriate.

A community’s Flood Insurance Rate Map serves several purposes. They  provide the basis for setting insurance premium rates and identifying  properties whose owners are required to purchase flood insurance. Since  the 1970s, homeowners with federally backed mortgages or mortgages  held by federally regulated lenders on property in a special flood hazard  area have been required to purchase flood insurance. Others may  purchase flood insurance voluntarily if they live in a participating  community. The maps also provide the basis for establishing minimum  floodplain management standards that communities must adopt and  enforce as part of their NFIP participation. As of May 2020, 22,487  communities across the United States and its territories voluntarily  participated in NFIP by adopting and agreeing to enforce flood-related  building codes and floodplain management regulations.

FEMA supports a variety of community-level flood mitigation activities that  are designed to reduce flood risk (and thus NFIP’s financial exposure).  These activities, which are implemented at the state and local levels,  include hazard mitigation planning; adoption and enforcement of  floodplain management regulations and building codes; and use of  hazard control structures such as levees, dams, and floodwalls or natural  protective features such as wetlands and dunes. FEMA provides  community-level mitigation funding through its HMA grant programs.

In addition, FEMA’s Community Rating System is a voluntary incentive  program that recognizes and encourages community floodplain  management activities that exceed the minimum NFIP requirements.  Flood insurance premium rates are discounted to reflect the reduced  flood risk resulting from community actions that meet the three goals of  reducing flood damage to insurable property, strengthening and  supporting the insurance aspects of NFIP, and encouraging a  comprehensive approach to floodplain management.

At the individual property level, mitigation options include property  acquisition—or “buyouts”—to either demolish a building for green space  or relocate a building to a low flood risk area, elevation, or floodproofing.

Acquisition and demolition (acquisition) is one of the primary methods  by which states or localities use FEMA funding to mitigate flood risk.  Through this process, a local or state government purchases land and  structures that flooded or are at risk from future floods from willing sellers  and demolishes the structures. The community restricts future  development on the land, which is maintained as open space in  perpetuity to restore and conserve the natural floodplain functions.  According to FEMA officials, an advantage of property acquisition is that it  offers a permanent solution to flood risks, whereas other mitigation  methods make properties safer from floods but not immune. Property  acquisition and demolition is a voluntary process, and property owners  are paid fair market value for their land and structures. Acquisition is  typically done on a community-wide scale, purchasing several or all  properties in an at-risk neighborhood. Acquisition projects typically require  building consensus from property owners and sustained communication  and collaboration between residents and the government executing the  project.

Acquisition and relocation (relocation) refers to purchasing a structure  and moving it to another location instead of demolishing it. Through this  process, state or local governments use FEMA funding to help purchase  land from willing sellers and assist the property owners with relocating the structure. The structure must be sound and feasible to move outside of  flood-prone areas. Relocation is a voluntary process and property owners  are paid fair market value for their land.

Elevation involves raising a structure so that the lowest occupied floor is  at or above the area’s base flood elevation. Structure elevation may be  achieved through a variety of methods, including elevating on continuous  foundation walls; elevating on open foundations, such as piles, piers, or  columns; and elevating on fill. Structures proposed for elevation must be  structurally sound and capable of being elevated safely. Further, elevation  projects must be designed and adequately anchored to prevent flotation,  collapse, and lateral movement of the structure from flooding, waves, and  wind.

Floodproofing falls into two categories: dry floodproofing and wet  floodproofing. Dry floodproofing involves sealing a structure to prevent  floodwater from entering. Examples of dry floodproofing measures include  using waterproof coatings or coverings to make walls impermeable to  water, installing waterproof shields, and installing devices that prevent  sewer and drain backup. Dry floodproofing is appropriate only where  floodwaters do not exceed three feet, the speed of flood waters is low,  and the duration of flooding is relatively short because walls and floors  may collapse from the pressure of higher water levels. Wet floodproofing  involves changing a structure to allow floodwaters to enter and exit with  minimal damage. Wet floodproofing is used in parts of a structure that are  not used as living space, such as a crawlspace, basement, or garage.  Examples of wet floodproofing measures include installing flood openings  in the foundation and enclosure walls below the base flood elevation,  using flood-resistant building materials and furnishings located below the  base flood elevation, and either elevating or floodproofing all utility  systems and associated equipment to protect them from damage.

FEMA administers three HMA grant programs that can be used to fund  flood mitigation projects: the Hazard Mitigation Grant Program (HMGP),  Pre-Disaster Mitigation (PDM), and Flood Mitigation Assistance (FMA).  Eligible HMA applicants include states, territories, and federally  recognized tribal governments. Local communities cannot apply directly  to FEMA for HMA funding but instead must collaborate as sub-applicants  with their state, territory, or tribal government and then receive funding  through that entity. Certain nonprofit organizations can act as sub- applicants but only under HMGP. Generally, individuals may not apply for  HMA funding, but they may benefit from a community application.  Applicants to all three programs must have FEMA-approved hazard  mitigation plans. FEMA evaluates HMA applications based on technical  feasibility and cost-effectiveness, among other factors. In fiscal year  2019, HMA awarded $859 million in funding. Eligible activities differ for  the three programs but must be consistent with FEMA’s National  Mitigation Framework.

The Hazard Mitigation Grant Program helps communities implement  hazard mitigation measures following a presidential major disaster  declaration to improve community resilience to future disasters. HMGP  provides funding to protect public or private property through various  mitigation measures based on state or tribal priorities. Mitigation project  examples include acquisition, relocation, retrofitting structures to minimize  damages from various natural hazards, and elevating flood prone  structures. HMGP recipients (states, territories, and federally recognized  tribal governments) are primarily responsible for prioritizing, selecting,  and administering state and local hazard mitigation projects. According to  FEMA guidance, although individuals may not apply directly to the state  for assistance, local governments engage interested property owners  during the application process. A formula based on the size of the  presidential disaster declaration determines the amount of money  available to HMGP.

Pre-Disaster Mitigation seeks to reduce overall risk to the population  and structures from future natural hazard events, while also reducing  reliance on federal funding in future disasters. PDM grants fund  mitigation plans and eligible projects that reduce or eliminate long-term  risk to people and property from natural disasters, such as property  acquisition, property elevation, earthquake hardening, and construction of  tornado and high-wind safe rooms. Generally, local governments (i.e.,  sub-applicants) submit mitigation planning and project applications to  their state, territory, or federally recognized tribal government (i.e.,  applicants) for review and prioritization. The state, territory, or federally  recognized tribal government then submits one PDM grant application to  FEMA for consideration. Annual Congressional appropriations fund these  grants, and FEMA awards them on a nationally competitive basis. In  fiscal year 2019, Congress appropriated $250 million to PDM, which was  the program’s final year of funding.

In 2018, Congress passed the Disaster Recovery Reform Act, which  included amendments to PDM, which FEMA calls the Building Resilient  Infrastructure and Communities program. According to FEMA officials,  this program is replacing PDM in fiscal year 2020 and will be funded  through the Disaster Relief Fund as a 6 percent set-aside from the  estimated total amount of grants for each major disaster declaration.  FEMA has solicited public input on the program and said it expects to  release a notice of funding opportunity in summer 2020.

Flood Mitigation Assistance is designed to reduce or eliminate flood  insurance claims by funding cost-effective flood mitigation projects that  reduce or eliminate long-term risk of flood damage to structures insured  under NFIP. Typical projects may include acquisition of RL properties,  elevation of buildings, and neighborhood-scale flood defense investment.  Generally, local communities will sponsor applications on behalf of  homeowners and then submit the applications to their state. A state or  federally recognized tribal government must submit the grant applications  to FEMA. Annual Congressional appropriations fund FMA grants, and  FEMA awards them on a nationally competitive basis. FMA  appropriations have remained relatively stable at about $175 million for  fiscal years 2016 through 2019.

RL properties present a financial challenge for NFIP. FEMA has three  definitions for such properties that vary slightly to meet the specific needs  of different programs:

NFIP Repetitive Loss refers to an NFIP-insured structure that has  incurred flood-related damage on two occasions during a 10-year  period, each resulting in at least a $1,000 claim payment. FEMA  uses the NFIP RL definition for insurance purposes related to the  Community Rating System, for local hazard mitigation plans, and for  eligibility determinations for preferred risk policies and individual  assistance.

FMA Repetitive Loss refers to an NFIP-insured structure that (a) has  incurred flood-related damage on two occasions in which the cost of  repair, on average, equaled or exceeded 25 percent of the value of  the structure at the time of each such flood event; and (b) at the time  of the second incidence of flood-related damage, the flood insurance  policy contained Increased Cost of Compliance coverage. FEMA  uses this definition for FMA purposes, as these properties are eligible  for the largest federal cost share for mitigation, up to 90 percent. This  is also the same definition NFIP uses to approve an Increased Cost of  Compliance payment.

Severe Repetitive Loss refers to an NFIP-insured structure that has  incurred flood-related damage for which (a) four or more separate  claims have been paid that exceeded $5,000 each and cumulatively  exceeded $20,000; or (b) at least two separate claim payments have  been made under such coverage, with the cumulative amount of such  claims exceeding the fair market value of the insured structure.  FEMA has two severe RL definitions for mitigation and insurance,  which are similar except that the insurance definition includes only  residential structures, while the mitigation definition includes all  structures. FEMA uses the severe RL definition for grant eligibility and  cost share, the Community Rating System, and insurance rate setting.

FEMA Grant Programs Are Key Funding Sources for Property Acquisition

FEMA Funds Acquisitions through Three Grant Programs That Have Varying Characteristics and Funding Levels

HMGP is the largest of FEMA’s three HMA programs and, unlike the  others, it is based on the amount of disaster assistance a state or territory  receives following a presidential disaster declaration (see table 1). PDM  and FMA are smaller grant programs that receive annual appropriations  and are not directly tied to an immediately preceding disaster. Because  these programs do not require an immediate disaster declaration, FEMA  considers them pre-disaster programs, as their intent is to mitigate  potential damage before disasters occur.

HMGP and PDM can be used for projects that mitigate the risk of many  hazards, including flood, wind, fire, earthquake, and drought, but FMA  can only be used to mitigate the risk of flood (see table 1). Furthermore,  FMA funds can only be used to mitigate properties that are insured by  NFIP, but HMGP and PDM funds can be used to mitigate properties  without NFIP coverage. Properties mitigated in a special flood hazard  area, where the structure remains on the parcel, must maintain a flood  insurance policy after project completion. HMA grants fund a variety of  methods to mitigate the flood risk of properties, including acquisition,  elevation, relocation, and floodproofing.

In most cases, HMA grants cover up to 75 percent of the project cost, and  the grantee generally must contribute the remainder using nonfederal  funds (although there are some exceptions, discussed below). However,  PDM will cover up to 90 percent of project costs for communities that  meet FEMA’s definition of small and impoverished. Moreover, FMA will  cover up to 90 percent for projects that mitigate RL properties and up to  100 percent for severe RL properties.

Funding levels for the three programs have varied over time because they  have depended on disaster declarations and annual appropriations (see  fig. 1). HMGP is the largest of the three programs—adjusted for inflation,  annual HMGP grants have reached $2.9 billion, while PDM and FMA  have never exceeded $300 million. According to FEMA officials, the  estimated annual funding for the Building Resilient Infrastructure and  Communities program, the successor to PDM, will average $300 million  to $500 million, as it will be funded by a 6 percent set aside of annual  estimated disaster grant expenditures.

HMA funding also varies by state. Louisiana has obligated the most  funding. After adjusting for inflation, it has obligated more than $3.1 billion  from all three programs since HMGP was created in 1989, followed by  California ($2.0 billion), Texas ($1.8 billion), New York ($1.6 billion), and  Florida ($1.5 billion), while the bottom 18 states and territories each  obligated less than $50 million (see fig. 2). Because HMGP is the largest  program and is tied to presidential declarations, these totals reflect, in  part, the extent to which states and territories have experienced natural  disasters in this time period.

States and Localities Can Use Other Federal Programs to Fund Cost Share Requirements for Acquisitions

Typically, recipients of federal mitigation grants must use nonfederal  funds to meet cost share requirements because federal law prohibits the  use of more than one source of federal disaster recovery funding for the  same purpose. However, according to FEMA, some federal programs  are exempt from these requirements due to authorizing statutes and  therefore may be used in concert with HMA funds.

Department of Housing and Urban Development’s Community  Development Block Grant (CDBG) program. The Department of  Housing and Urban Development awards CDBG funds to state and local  governments to support a variety of community and economic  development needs. According to FEMA’s HMA Cost Sharing Guide,  HMA applicants may use several categories of CDBG funds as a source  of project cost share, as long as the project meets Department of Housing  and Urban Development rules. CDBG Disaster Recovery funds are the  most frequently used form of HMGP cost share from a federal agency,  according to FEMA.

FEMA Increased Cost of Compliance coverage. NFIP offers Increased  Cost of Compliance coverage, which provides up to $30,000 for  policyholders to fund mitigation efforts on their property if they experience  substantial damage or if their structure is an RL property. Between 1997  and 2014, the vast majority (99 percent) of Increased Cost of Compliance  claims met the substantially damaged property definition, according to a  2017 report from the University of Pennsylvania. Unlike CDBG, which is  awarded to states and local governments, Increased Cost of Compliance  is awarded directly to individuals. According to FEMA, it is eligible as an  HMA nonfederal cost share because it is considered a direct contract  between the insurer and policyholder. FEMA allows recipients to assign  their funds to the community as part of a collective mitigation project, and  the community is then obligated to provide HMA funding to any property  owner who contributed Increased Cost of Compliance dollars toward the  nonfederal cost share. As of September 2019, FEMA had closed more  than 38,000 Increased Cost of Compliance claims with dates of loss since  1997, totaling more than $877 million.

Small Business Administration disaster loans. Small Business  Administration disaster loans provide up to $200,000 for repairing or  replacing a primary residence and $40,000 for repairing or replacing  personal items that have been affected by a disaster. The interest rate  cannot exceed 4 percent for applicants unable to access credit  elsewhere, and cannot exceed 8 percent for all others. Secondary or  vacation homes are not eligible, but qualified rental properties may be  eligible under the Small Business Administration’s business disaster loan  program, which offers loans of up to $2 million. According to FEMA  guidance, these loans can serve as a source of cost share if HMA grants  are disbursed early enough; however, the differing award timelines often  make these funding sources incompatible. Further, disaster loans may  not be eligible in conjunction with HMA funds due to duplication of  benefits, but general-purpose Small Business Administration loans are  not subject to this restriction, according to FEMA.

Other Federal and Nonfederal Programs Fund Acquisitions

In addition to FEMA’s three HMA programs, other federal, state, and local  programs have helped acquire properties.

Community Development Block Grants. In addition to its use as a cost- share complement to HMA grants, states and communities can use  CDBG Disaster Recovery funding as a stand-alone source of property  acquisition funds, according to the Department of Housing and Urban  Development. Availability of CDBG Disaster Recovery funds is subject to  supplemental appropriations following a presidential disaster declaration  and must be used in response to that specific disaster. CDBG Disaster  Recovery funds are disbursed to state and local governments and not to  individuals directly. However, the governmental recipient can award  CDBG Disaster Recovery funds to private citizens, nonprofits, economic  development organizations, businesses, and other state agencies. The  Bipartisan Budget Act of 2018 appropriated funding for CDBG, of which  the Department of Housing and Urban Development allocated almost  $6.9 billion for CDBG mitigation funds for the first time, as a result of the  2015 to 2017 disasters. Unlike CDBG Disaster Recovery funds, which  the recipient must use in response to a specific disaster, recipients may  use CDBG Mitigation funds to mitigate risks from future disasters.

U.S. Army Corps of Engineers’ National Nonstructural Committee.  The Army Corps of Engineers (Corps) conducts a range of mitigation  measures through the National Nonstructural Committee, including  acquisitions, elevations, relocations, and floodplain mapping.  Nonstructural refers to measures that attempt to mitigate the  consequences of floods, as opposed to structural measures intended to  prevent floods from occurring. According to the Corps, except for limited  research funding, it does not offer grants for flood risk management  projects, and large projects generally require specific authorization from  Congress. However, the Corps’ Continuing Authority Program allows it to  execute smaller projects at its discretion. For example, for one of the  programs, the federal government funds 65 percent of a project’s cost,  and the project sponsor must provide all land, easement, rights-of-way,  relocations, and disposal areas required for the project. The sponsor’s  cost share includes credit for provision of the requirements above and  pre-approved work-in-kind, but at least five percent must be provided in  cash.

Department of Agriculture’s Natural Resources Conservation  Service Emergency Watershed Protection Program. The Federal  Agriculture Improvement and Reform Act of 1996 enables the Emergency  Watershed Protection Program to purchase floodplain easements on  residential and agricultural land for flood mitigation purposes and to return  the land to its natural state. For agricultural and residential land, this  program pays up to the entire easement value and also funds property  demolition or relocation, according to the Department of Agriculture.  Land generally must have flooded in the past year or twice within the  previous 10 years to be considered eligible.

State and local acquisition programs. While state and local  governments are active participants in federal acquisition projects, some  have also developed their own acquisition programs. These programs  vary on the extent to which they rely on federal funds, if at all. For  example:

The Harris County Flood Control District, a special purpose district, in  Texas acquired about 3,100 properties between 1985 and 2017,  according to a 2018 report from Rice University, using a combination  of FEMA grants, Corps funds, and local dollars.

Charlotte-Mecklenburg Storm Water Services, a joint city-county utility  in North Carolina, has acquired more than 400 homes since 1999.  Initially, it primarily used federal funds, but now it uses almost solely  stormwater fees and other local revenue to fund acquisitions. The  utility’s Quick Buys program allows it to acquire properties soon after  a flood, before homeowners invest in repairs, whereas federal  acquisitions often occur after property owners have begun rebuilding,  according to FEMA officials.

New Jersey, through its Blue Acres program, plans to acquire up to  1,300 properties damaged by Superstorm Sandy. The program has  used state funds, including $36 million in bonds, as well as more than  $300 million in federal funding received from multiple agencies.

FEMA Has Funded the Mitigation of Many Properties, but the Number of Repetitive Loss Properties Continues to Rise

Most Flood Mitigation Spending Is Used for Property Acquisitions after Flooding Occurs

Since 1989, the primary means by which FEMA has mitigated flood risk at  the property level has been by funding property acquisitions. Acquisitions  accounted for about 75 percent of FEMA’s $5.4 billion in flood mitigation  spending, adjusted for inflation, from 1989 to 2018 (see fig. 3). Most of  the remaining spending was used to elevate properties, with smaller  amounts used to floodproof and relocate properties. The average federal  cost-per-property was $136,000 for acquisitions and $107,000 for  elevations, according to 2008-2014 FEMA data.

As seen in figure 4, FEMA-funded property acquisitions have fluctuated  over time but have generally increased since FEMA’s HMA programs  began. For example, from 1989 through 1992—the first four years of  HMGP funding and prior to the creation of PDM and FMA—less than $8  million, adjusted for inflation, was obligated for property acquisitions each  year, resulting in fewer than 200 acquisitions each year (see fig. 4). The  highest acquisition funding generally was associated with years that had  significant flood events, such as Superstorm Sandy (2012) and  Hurricanes Harvey, Irma, and Maria (2017).

From fiscal years 1989-2018, approximately $3.3 billion of property  acquisition funding, adjusted for inflation, occurred through HMGP,  resulting in the acquisition of 41,458 properties (see fig. 5). HMGP  represented about 90 percent of all property acquisitions and 82 percent  of all acquisition funding, with PDM and FMA representing the remainder.  As a result, most FEMA-funded acquisitions occurred following flood  events.

Most of the funding, adjusted for inflation, for HMGP’s and PDM’s flood  mitigation projects has been for property acquisition (83 percent and 89  percent of total funds, respectively), while most FMA funding has been for  elevation (49 percent).

Despite Acquisition and Other Mitigation, Nonmitigated Repetitive Loss Properties Have Increased in Number

Although FEMA mitigated more than 57,000 properties for flood risk from  1989 to 2018, including more than 46,000 through acquisition, the  number of nonmitigated RL properties increased from 2009 to 2018.  Figure 6 shows that this growth in the number of RL properties has  outpaced efforts to mitigate their flood risk. From 2009 through 2018,  FEMA’s inventory of new RL properties grew by 64,101. During this  period, FEMA mitigated 4,436 RL properties through its three HMA  programs, and an additional 15,047 were mitigated through other federal  or state programs. As a result, the number of nonmitigated RL properties  increased by 44,618—more than double the number of RL properties that  were mitigated in that time period.

Some States Have Mitigated More Properties than Others Relative to Their Population of Repetitive Loss Properties

States varied in the extent to which they mitigated high-risk properties,  including RL properties, between 1989 and 2018. While FEMA does not  require a property to be an RL property to receive flood mitigation  funding, the number of properties mitigated by a state relative to its  population of RL properties provides context to its flood mitigation  progress. For example, some states with large numbers of RL properties,  such as Texas, Louisiana, Florida, and New York, mitigated few  properties relative to their numbers of RL properties (see table 2). Other  states, such as Missouri and North Carolina, have far fewer RL properties  but have mitigated more properties relative to their numbers of RL  properties.

States also varied in their methods for flood mitigation (see table 2). For  example, while property acquisition accounted for 81 percent of mitigated  properties nationwide, it represented closer to half of mitigated properties  in Virginia, New Jersey, and Florida and only 19 percent in Louisiana.  According to some FEMA and local officials, high property values in some  regions can make acquisitions cost prohibitive and other mitigation  methods such as elevation more attractive because they do not incur the  cost of purchasing the land.

Many other factors could affect mitigation, including homeowners’  preferences. Further, the voluntary nature of FEMA’s HMA programs may  limit states’ ability to acquire properties with known flood risk. According  to FEMA, acquisition permanently addresses flood risk because, unlike  elevation or floodproofing, it moves individuals and structures away from  flood risk rather than mitigating a structure in place. In a subsequent  report, we plan to explore in more detail the factors, including homeowner  demand for acquisition, that have affected the extent to which states have  used acquisition to mitigate flood risk.

While Property Acquisitions Help Reduce Flood Risk for Properties, Insufficient Premium Revenue Perpetuates Fiscal Exposure

NFIP represents a fiscal exposure to the federal government because its  premium rates have not kept pace with the flood risk of the properties it  insures. Addressing this imbalance would mean reducing the flood risk of  the insured properties, increasing premium revenue, or some combination  of both. Despite FEMA’s efforts to mitigate its insured properties’ flood  risk, premium rates for many properties do not reflect the full estimated  risk of loss. As we have reported previously, mitigation alone will not be  sufficient to resolve NFIP’s financial challenges; structural reforms to the  program’s premium rates will also be necessary.

Recent Catastrophic Flood Events and Projections Indicate Potential Increases in Flood Risk

NFIP’s total annual flood claim payments have grown in recent years,  potentially indicating an increase in flood risk. For example, the eight  years of the highest annual NFIP claims have all occurred since 2004,  with particularly catastrophic flood events accounting for much of these  claims:  In 2005, claims reached $17.8 billion ($23.3 billion, adjusted for  inflation), largely due to Hurricanes Katrina, Rita, and Wilma.

In 2012, claims reached $9.6 billion ($10.7 billion, adjusted for  inflation), largely due to Superstorm Sandy.

In 2017, claims reached $10.5 billion ($11.0 billion, adjusted for  inflation), largely due to Hurricanes Harvey, Irma, and Maria.

These severe weather events appear to be contributing to the long-term  increases in claims paid by NFIP, as would be expected with infrequent  but severe events. As seen in figure 7, the amount of claims paid per  policy, adjusted for inflation, does not show a steady increase in claims  but rather substantial spikes in certain years associated with catastrophic  flooding events.

RL properties have contributed heavily to NFIP’s claims and, as noted  earlier, the number of RL properties continues to rise despite FEMA’s  mitigation efforts. Of the $69.7 billion in claims NFIP paid out from 1978 to  2019, $22.2 billion was for flood damage sustained by RL properties (32  percent).

The frequency and intensity of extreme weather events, such as floods,  are expected to increase in coming years due to climate change,  according to the U.S. Global Change Research Program and the National  Academies of Sciences. Further, numerous studies have concluded that  climate change poses risks to many environmental and economic  systems and a significant financial risk to the federal government. For  example, according to the November 2018 National Climate Assessment  report, the continued increase in the frequency and extent of high-tide  flooding due to sea level rise threatens America’s trillion-dollar coastal  property market. According to the National Oceanic and Atmospheric  Administration, minor flood events (sometimes referred to as nuisance  flooding) also are projected to become more frequent and widespread  due to climate change.

Several Categories of Premium Rates Do Not Fully Reflect Flood Risk

While it is uncertain the exact extent to which flood risk has changed and  will continue to change, NFIP’s fiscal exposure will persist as long as  premium rates do not keep pace with flood risk. As we have been  reporting since 1983, NFIP’s premium rates do not reflect the full risk of  loss because of various legislative requirements and FEMA practices.  To set premium rates, FEMA considers several factors, including location  in flood zones, elevation of the property relative to the community’s base  flood elevation, and characteristics of the property, such as building type,  number of floors, presence of a basement, and year built relative to the  year of the community’s original flood map. Most NFIP policies have  premium rates that are deemed by FEMA to be full-risk rates, which  FEMA defines as sufficient to pay anticipated losses and expenses.  However, FEMA’s overall rate structure may not reflect the full long-term  estimated risk of flooding, as discussed below.

Subsidized rates. NFIP offers some policyholders subsidized rates—that  is, rates that intentionally do not reflect the full risk of flooding. These  premium rates are intended to encourage the widespread purchase of  flood insurance by property owners and encourage floodplain  management by communities. Subsidized rates generally are offered to  properties in high-risk locations (special flood hazard areas) that were  built before flood maps were created. FEMA staff said they have begun  increasing rates for certain subsidized properties as prescribed under the  Biggert-Waters Flood Insurance Reform Act of 2012 and the Homeowner  Flood Insurance Affordability Act of 2014. In addition, the percentage of  subsidized policies is decreasing. According to FEMA data, the  percentage of NFIP policies receiving subsidized rates dropped from  about 22 percent in July 2013 to about 17 percent in June 2019.

In 2013, we recommended that FEMA obtain elevation information to  determine full-risk rates for subsidized properties. As of January 2020,  FEMA had not fully implemented this recommendation but was in the  process of doing so. For example, FEMA had requested proposals from  third-party vendors for obtaining the elevation information and was  reviewing these proposals. This information remains necessary for FEMA  to determine the adequacy of its premium rates and the costs of any  subsidization. It will also allow Congress and the public to understand the  amount of unfunded subsidization within the program and the federal  fiscal exposure it creates.

Grandfathered rates. FEMA allows some property owners whose  properties are remapped into higher-risk flood zones to continue to pay  the premium rate from the lower-risk zone. FEMA data show that about  9 percent of NFIP policies were receiving a grandfathered rate as of June  2019. In 2008, we recommended that FEMA collect data to analyze the  effect of grandfathered policies on NFIP’s fiscal exposure. As of  February 2020, FEMA officials said they had not fully implemented this  recommendation but were in the process of doing so. The officials told us  they had finished collecting data on grandfathered policies and that they  planned to analyze it as they completed efforts to update their premium  rate setting approach. Collection and analysis of data on grandfathered  policies will help FEMA understand and communicate the extent to which  these policies are contributing to NFIP’s fiscal exposure.

Rates designated full-risk. As we reported in 2008 and 2016, it is  unclear whether premiums FEMA considers to be full-risk actually reflect  the full long-term estimated risk of loss. For example, NFIP full-risk  premium rates do not fully reflect the risk of catastrophic losses or the  expenses associated with managing them. Private insurers typically  manage catastrophic risk using capital, reinsurance, and other  instruments, such as catastrophe bonds, and include the associated  expenses in premium rates.

By contrast, FEMA has traditionally managed catastrophic risk by relying  on its authority to borrow from Treasury. In January 2017, FEMA began  purchasing reinsurance to transfer some of its flood risk exposure to the  private reinsurance market. However, FEMA has not accounted for these  expenses in setting its NFIP premium rates. Reinsurance could be  beneficial because it would allow FEMA to recognize some of its flood risk  and the associated costs up front through the premiums it must pay to the  reinsurers rather than after the fact in borrowing from Treasury. However,  because reinsurers must charge FEMA premiums to compensate for the  risk they assume, reinsurance’s primary benefit would be to manage risk  rather than to reduce NFIP’s expected long-term fiscal exposure.

Insufficient Premium Revenue Contributes to NFIP’s Fiscal Exposure

Congress has directed FEMA to provide discounted premium rates to  promote affordability for policyholders but did not provide FEMA with  dedicated funds to pay for these subsidies. As a result, premium  revenue has been insufficient to pay claims in some years, requiring  borrowing from Treasury to make up for the shortfall. While Congress  passed reforms to NFIP in 1994 and 2004, neither set of actions  sufficiently addressed program revenue.

In 2005, Hurricanes Katrina, Rita, and Wilma hit the Gulf Coast and  resulted in NFIP borrowing nearly $17 billion from Treasury to pay claims  (see fig. 8). In July 2012, Congress passed the Biggert-Waters Flood  Insurance Reform Act, which contained significant reforms to NFIP’s  premium rates. But a few months later, Superstorm Sandy occurred,  pushing NFIP’s debt to $24 billion. Following policyholders’ concerns  about the rate increases authorized by the 2012 act, Congress slowed the  pace of many of these rate increases in 2014 with the Homeowner Flood  Insurance Affordability Act.

In the fall of 2017, Hurricanes Harvey, Irma, and Maria occurred,  prompting additional borrowing from Treasury and causing NFIP to reach  its borrowing limit. In response, Congress canceled $16 billion of NFIP’s  debt in October 2017, which allowed NFIP to pay claims from these  storms. Since September 2017, NFIP has been operating under a series  of short-term authorizations, the most recent of which expires in  September 2020. As of March 2020, NFIP’s debt remained at $20.5  billion.

To improve NFIP’s solvency and enhance the nation’s resilience to flood  risk, we suggested in 2017 that Congress could make comprehensive  reforms that include actions in six areas. We reported that it was  unlikely that FEMA would be able to repay its debt and that addressing it  would require Congress to either appropriate funds or eliminate the  requirement that FEMA repay the accumulated debt. However,  eliminating the debt without addressing the underlying cause of the  debt—insufficient premium rates—would leave the federal taxpayer  exposed to a program requiring repeated borrowing.

To address NFIP’s fiscal exposure, there are two general approaches:  decrease costs or increase revenue. Decreasing costs to the program in  the form of claims involves mitigating insured properties’ flood risks.  Mitigation can be very costly, but there will be some properties for which  the cost to mitigate will be outweighed by the benefit of reduced flood risk  and, ultimately, fiscal exposure. Mitigation may be a cost-effective option  for those properties for which full-risk rates would be cost-prohibitive.

Increasing revenue would require reforms to NFIP’s premium rates.  FEMA has begun increasing rates on subsidized properties. But, as we  suggested in 2017, Congress could remove existing legislative barriers to  FEMA’s premium rate revisions. Members of Congress and others have  raised concerns about such reforms because raising premium rates may  make coverage unaffordable for some policyholders. To address these  concerns, we suggested that all policies include full-risk premium rates,  with targeted, means-based, appropriated subsidies for some policies.  This would improve the program’s solvency while also addressing  affordability concerns. Assigning full-risk premium rates to all policies  would remove subsidies from those who do not need them, helping  improve solvency. It would also more accurately signal the true flood risk  to property owners and enhance resilience by incentivizing mitigation  measures, such as acquisition. Means-based subsidies would ensure that  property owners who needed help would get it, and an explicit  appropriation for the subsidies would make their true cost transparent to  taxpayers. We maintain that a comprehensive approach that includes  mitigation and rate reform is needed to address NFIP’s fiscal exposure.

Because several categories of NFIP premium rates do not reflect the full  risk of flood loss, FEMA has had to borrow $36.5 billion from Treasury to  pay claims from several catastrophic flood events since 2005. To address  this, some have suggested additional funding to mitigate RL properties.  While we acknowledge that mitigation is part of the solution, we maintain  that a more comprehensive approach is necessary to address the  program’s fiscal exposure.

We have made two recommendations to FEMA that, if implemented,  could help inform Congress’ efforts to reform NFIP. In 2008, we  recommended that FEMA collect information on grandfathered properties  and analyze their financial effect on NFIP, and in 2013, we recommended  that FEMA obtain elevation information on subsidized properties. By  implementing these recommendations, FEMA would better understand  NFIP’s fiscal exposure and be able to communicate this information to  Congress.

Further, we suggested in 2017 that Congress take a comprehensive  approach to reforming NFIP. One important first step would be to  implement full-risk premium rates for all policies, with appropriated  means-based subsidies for some policies. Full-risk premium rates would  remove subsidies from those who do not need them, helping improve  solvency, and also more accurately signal the true flood risk to property  owners and incentivize efforts to mitigate flood risk. Further, means- based subsidies would ensure that property owners who need help will  get it, and having Congress explicitly appropriate for the subsidies would  make the true cost of the subsidy transparent to taxpayers. While this  would be an important step to putting NFIP on a sustainable path,  comprehensive reform of the program should also address the other  issues we have identified, including mitigating the flood risk of insured  properties.

We provided a draft of this report to the Department of Homeland Security  for its review and comment. The agency provided technical comments,  which we incorporated as appropriate.

We are sending copies of this report to the appropriate congressional  committees, the Acting Secretary of Homeland Security, and other  interested parties. In addition, the report is available at no charge on the  GAO website at https://www.gao.gov.

If you or your staff have any questions about this report, please contact  me at (202) 512-8678 or cackleya@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III.

Appendix I: Objectives, Scope, and Methodology

This report addresses the Federal Emergency Management Agency’s  (FEMA) National Flood Insurance Program (NFIP). Our objectives were to  examine (1) funding programs available for property acquisitions, (2)  FEMA’s flood mitigation efforts, and (3) factors contributing to NFIP’s  fiscal exposure.

To describe funding programs available for property acquisitions, we  reviewed authorizing legislation, the Code of Federal Regulations, and  FEMA guidance and manuals, including the Hazard Mitigation Assistance  Guidance and Cost Share Guide, to identify program characteristics,  eligibility requirements, and application guidelines. To identify funding for  these programs, we analyzed FEMA’s project-level Hazard Mitigation  Assistance (HMA) data from its Enterprise Applications Development  Integration and Sustainment system, which FEMA uses to track mitigation  projects funded through its HMA grant programs. To summarize  Increased Cost of Compliance coverage, which NFIP policyholders can  use to fund mitigation efforts, we analyzed FEMA’s NFIP claims database  to identify the number and amount of such claims. We also interviewed  the FEMA officials responsible for administering these grant programs.  Further, we identified other federal agency programs that can fund  property acquisitions or meet cost share requirements and reviewed their  authorizing legislation and their relevant federal regulations. Finally, to  identify examples of state and local programs that have been used to  fund property acquisitions, we reviewed academic reports, including from  the University of North Carolina and Rice University.

To review FEMA’s flood mitigation efforts, we analyzed FEMA’s project- level HMA data from the “Mitigation Universe” of its Enterprise  Applications Development Integration and Sustainment system. We  analyzed several variables in this dataset, including number of properties,  federal share obligated, mitigation type category, grant program area,  grant program fiscal year, and state.

For the analyses by mitigation type category, we excluded projects (79  percent of the total records) that did not include a flood mitigation activity  (those with values of “Other” or “Pure Retrofit”). Of the remaining records,  98 percent were “Pure,” meaning all properties within each project were  of a single mitigation method type (acquisition, elevation, floodproof, or  relocation). The remaining 2 percent were “Mixed,” indicating a project  contained at least one acquisition and at least one elevation but could  also contain other mitigation methods. For analyses by grant program  area, we treated projects funded through the Severe Repetitive Loss and  Repetitive Flood Claims grant programs as being part of the Flood  Mitigation Assistance program and projects funded through the  Legislative Pre-Disaster Mitigation program as being part of the Pre- Disaster Mitigation program. For data on the number of flood mitigated  properties, we used the final number of properties mitigated by a project.  For data on funding, we used the federal share of the project’s obligated  funding.

To analyze mitigated and nonmitigated repetitive loss (RL) properties, we  summarized FEMA’s RL property mitigation report, which tracked the  cumulative number of RL properties by year from June 2009 through  June 2018. To describe the number of RL properties by state, we  analyzed FEMA’s list of RL properties as of August 31, 2019, which  included every property that at any point FEMA had designated as an RL  property under any of its three definitions. The list included properties that  had since been mitigated, as well as those that are no longer insured by  NFIP.

To examine factors contributing to NFIP’s fiscal exposure, we analyzed  FEMA’s claims dataset as of September 30, 2019. This dataset includes  the more than 2 million claims paid to NFIP policyholders since the  beginning of the program. We excluded records whose status was “open”  or “closed without payment.” Further, we excluded records whose year of  loss was before 1978 because FEMA officials told us that that was the  first year they considered their claims data to be reliable and complete.  To identify factors that contribute to NFIP’s fiscal exposure and illustrate  how this fiscal exposure has materialized and changed over time, we  reviewed several of our previous reports and the Department of the  Treasury’s statements of public debt. Finally, to summarize how flood risk  could change in the future, we reviewed our previous reports on climate  change.

In general, we adjusted for inflation any dollar figures that we compared  or aggregated across multiple years and indicated this accordingly. To do  this, we used the Bureau of Labor Statistics’ Consumer Price Index for All  Urban Consumers.

To assess the reliability of all of the datasets we analyzed for this report,  we requested and reviewed preliminary versions of the data and  accompanying data dictionaries. We used the data dictionary to identify  potential variables for use in our analyses and output statistics on these  variables (e.g., frequencies of values, number of blanks or zero values,  minimum, maximum, and mean) to identify any potential reliability  concerns such as outliers or missing values. We met with relevant FEMA  officials to discuss each of the data sets to understand how FEMA  collected, used, and maintained the data; the reliability and completeness  of key variables; reasons for any potential discrepancies we identified;  and whether our understanding of the data and approach to analyzing  them were accurate and reasonable. After these meetings, we requested  updated versions of the data and updated our analyses accordingly. We  determined that all data elements we assessed were sufficiently  appropriate and reliable for this report’s objectives.

We conducted this performance audit from January 2019 to June 2020 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.

Appendix II: Significant Events and GAO Reports Related to the National Flood Insurance Program’s Fiscal Exposure

January 1983: We recommended that FEMA improve its rate-setting  process to ensure adequate income for NFIP and suggested that  Congress either limit FEMA’s borrowing for extraordinary losses or  establish an emergency fund for such losses, and pay for NFIP  subsidies with appropriations.

March 1994: We found that NFIP’s premium income was insufficient  to meet expected future losses because of subsidized rates and  suggested that Congress consider how any changes in premium rates  would affect policyholder participation.

September 1994: National Flood Insurance Reform Act.

Developed a mitigation assistance program and expanded the  mandatory purchase requirement.

June 2004: Flood Insurance Reform Act. Authorized grant  programs to mitigate properties that experienced repetitive flooding  losses.

August-October 2005: Hurricanes Katrina, Rita, Wilma. Caused  $17.1 billion in NFIP claims. FEMA debt to Treasury increased to  $16.9 billion in fiscal year 2006.

March 2006: We added NFIP to our high-risk list.

October 2008: We recommended that FEMA collect data to analyze  the effect of grandfathered policies on NFIP’s fiscal exposure.

November 2008: We identified three options for addressing the  financial impact of subsidies: increasing mitigation efforts; eliminating  or reducing subsidies; and targeting subsidies based on need.

June 2011: We suggested that Congress allow NFIP to charge full- risk premium rates to all property owners and provide assistance to  some categories of owners to pay those premiums.

July 2012: Biggert-Waters Flood Insurance Reform Act. Required  FEMA to increase rates for certain subsidized properties and  grandfathered properties; create a NFIP reserve fund; and improve  flood risk mapping.

October 2012: Superstorm Sandy. Caused $8.8 billion in NFIP  claims. FEMA debt to Treasury increased to $24 billion in fiscal year  2013.

February 2013: We added limiting the federal government’s fiscal  exposure by better managing climate change risks to our high-risk  list.

July 2013: We recommended that FEMA obtain elevation information  to determine full-risk rates for subsidized policyholders.

March 2014: Homeowner Flood Insurance Affordability Act.

Reinstated certain rate subsidies removed by the Biggert-Waters  Flood Insurance Reform Act of 2012; established a new subsidy for  properties that are newly mapped into higher-risk zones; restored  grandfathered rates; and created a premium surcharge that would be  deposited into the NFIP reserve fund.

October 2014: We recommended that FEMA amend NFIP minimum  standards for floodplain management to encourage forward-looking  construction and rebuilding efforts that reduce long-term risk and  federal exposure to losses.

July 2015: We recommended that the Mitigation Framework  Leadership Group establish an investment strategy to identify,  prioritize, and guide federal investments in disaster resilience and  hazard mitigation-related activities.

August-October 2016: Hurricane Matthew and Louisiana floods.

Caused $3.1 billion in NFIP claims. FEMA debt to Treasury debt  increased to $24.6 billion in early fiscal year 2017.

April 2017: We suggested that Congress make comprehensive  reforms to NFIP that include actions in six areas: (1) addressing the  debt; (2) removing legislative barriers to full-risk premium rates; (3)  addressing affordability; (4) increasing consumer participation; (5)  removing barriers to private-sector involvement; and (6) protecting  NFIP flood resilience efforts.

August-September 2017: Hurricanes Harvey, Irma, and Maria.

Caused $10 billion in NFIP claims. FEMA reached the limit of its  Treasury borrowing authority of $30.4 billion.

September 2017: NFIP’s last long-term authorization ended, resulting  in a string of short-term reauthorizations.

October 2017: Congress canceled $16 billion of NFIP’s debt to  enable FEMA to continue paying flood claims. This reduced FEMA’s  debt to Treasury to $20.5 billion.

March 2020: FEMA’s debt to Treasury remained at $20.5 billion.

September 2020: NFIP’s current short-term authorization ends.

Appendix III: GAO Contact and Staff Acknowledgments

Alicia Puente Cackley, (202) 512-8678 or cackleya@gao.gov  In addition to the contact named above, Patrick Ward (Assistant Director),  Christopher Forys (Analyst in Charge), Emily Bond, Christina Cantor,  William Chatlos, Eli Dile, Lijia Guo, Holly Halifax, Laura Ann Holland,  Yann Panassie, Stephen Ruszczyk, Jessica Sandler, Joseph Silvestri,  Jena Sinkfield, and Kelsey Wilson made key contributions to this report.

FEMA grants have been used to acquire and demolish flood-prone properties to help reduce flood damage. Reduced damage should lead to fewer or less costly claims for the National Flood Insurance Program, which FEMA also administers. But the number of such properties keeps growing, and the program still doesn’t collect enough in premiums to cover claims over the long term.

The flood insurance program is $20.5 billion in debt to Treasury, and continues to put taxpayers at financial risk. We reiterate our previous suggestion that Congress comprehensively reform the program to ensure its solvency and improve national flood resilience.