The federal government’s shutdown won’t affect payment of flood insurance claims, and the insurance that people have remains in effect. But it’s threatening to impede some home sales in Louisiana from going forward.
That was the assessment of experts, members of Congress and the Federal Emergency Management Agency on the impact of the government shutdown on those who rely on the National Flood Insurance Program.
The NFIP, which backs federally subsidized insurance for nearly 5.1 million policy holders nationwide, is of particular importance in Louisiana, where there are nearly 500,000 policy holders, according to FEMA statistics. The House-passed continuing resolution that the Senate rejected Friday night contained a provision to reauthorize the NFIP through Feb. 16.
The first government shutdown since Oct. 1, 2013, has had little to do with the NFIP but has centered on Democrats' push for a deal to grant legal status to so-called DREAMers. They are the roughly 800,000 people who were brought to the nation illegally as children but have been protected under President Barack Obama's Deferred Action for Childhood Arrivals program, which expires in early March.
While the finger-pointing over the shutdown by both Democrats and Republicans has been in full force, Congress and President Donald Trump's inability to find an agreement means a whole variety of federal agencies must halt some or all operations until the money spigot reopens.
Caitlin Berni, vice president of policy and communications for Greater New Orleans Inc., pointed out that the NFIP, as well as the private insurers that actually write the vast majority of polices for the NFIP, can't write new flood insurance policies or renew existing ones once the old ones expire.
That means people trying to close on a new home purchase in an area where their mortgage requires flood insurance will likely have to wait until the NFIP is reauthorized, Berni added.
The National Association of Realtors estimated in a 2011 study that the inability to write new policies affected 1,332 homes sale closings per day, or roughly 40,000 per month. The association derived the estimate from a 33-day period during the height of summer home sales in 2010 when the NFIP had not been reauthorized.
U.S. Sen. John Kennedy, R-La., said the association's monthly estimate of the impact on homes sales translates into a $7.5 billion hit to the economy. That's just a tiny fraction of the national economic impact from a shutdown tied to what he saw as an "amnesty" deal for those covered under DACA when there was still time for such deal and willingness from Trump to reach it without the need for a shutdown.
"It's just bone-deep, down-to-the-marrow stupid," Kennedy said.
Randy Noel, a custom home builder in the greater New Orleans area, said he is worried about as many as three home sale closings scheduled between Sunday and Wednesday that will need flood insurance to complete the deal.
Noel, who is also chairman of the National Association of Home Builders, said he did learn Saturday of a NFIP guidance indicating that if a buyer has already applied for the insurance policy, NFIP will honor the application and issue the policy.
"We may still be able to close if the guidance gets out to the mortgage companies, so they'll go ahead and let them close," said Noel, a founder of Reve Inc. in Laplace.
But that applies only to applications already in place before the shutdown. Noel added that a related stumbling block for home closings is that, during the shutdown, the IRS stops issuing the necessary documentation for home loans.
"If this thing goes on for a while, it could be a problem," Noel said.
According to the Congressional Research Service, the longest government shutdown happened at the end of 1995 and in early 1996 when then-President Bill Clinton, a Democrat, and Congressional Republicans battled over the budget. The shutdown lasted 21 days.
Noel said his association and other groups with interests in the real estate industry have been among those lobbying for a long-term reauthorization of the NFIP. Noel said he wants to see the program no longer tied to the continuing resolutions Congress has used to keep the government running but that also have been subject to interruptions.
The state's congressional delegation has been negotiating just such a reauthorization and attempted reform of the fiscally strained flood program. But members said Saturday those talks have largely been sidelined in the debate over a short-term funding extension.
U.S. Rep. Garret Graves, R-Baton Rouge, said some members have discussed including aspects of legislation that recently passed the House that would provide billions more in additional hurricane recovery money and ease federal recovery policy as a way to draw more votes on a funding deal.
Graves said Saturday afternoon he was hopeful a deal could be reached soon but doesn't expect it will deal with the broader reforms to the NFIP, instead continuing it as it has been operating.
Kennedy, for one, said he is not willing to deal with the nation's "broken immigration system" in a piecemeal fashion but wants to do it in a way that would include a deal on DACA, construction of a border wall and other elements to prevent the need for more amnesty in the future.
Some Democrats, however, while also decrying the shutdown, have blamed Trump for negotiating in bad faith and instead argued he and Republicans should focus on a long-term, "moral" spending plan that deals with DACA, long-term renewal of a federal health insurance program for children, hurricane recovery money, the military and other pressing issues.
"The Republican administration and Republican-led Congress is trying to message their way out of their irresponsible approach to governing," U.S. Rep. Cedric Richmond, D-New Orleans, said in a statement as chairman of the Congressional Black Caucus. "These short-term funding bills are disruptive to black communities and to all of the American people. They hurt families, small businesses, and can do damage to local economies."