(Bloomberg) -- President Donald Trump proposed ending federal flood insurance for new homes in areas most at risk of flooding, a change that could curtail new construction in vast parts of Florida, Louisiana and along the Eastern Seaboard.
Trump’s plan would radically overhaul the program created in 1968 to help protect homeowners who live along coasts or near rivers. The idea, sent by the White House to Congress, created an unlikely set of responses: Home builders warned it could stifle the economy while climate activists, who have battled Trump, called the idea smart.
On Wednesday Mick Mulvaney, the director of White House Office of Management and Budget, sent a letter to Congress calling for changes to the taxpayer-subsidized National Flood Insurance Program, which is $25 billion in debt thanks to ever-worsening storms. Mulvaney’s proposals included preventing homes built in flood plains after 2020 from obtaining insurance under the program. Those homes could instead seek private coverage, which is often prohibitively expensive -- if it’s available at all.
The National Association of Home Builders said it strongly opposed the idea, arguing it would "harm local communities and impair economic growth."
"It would simply prevent home builders from being able to provide safe and affordable housing," the association’s chairman, Granger MacDonald, said in a statement. "Why does OMB needlessly propose to penalize new construction?"
The federal government provides flood insurance to those at risk through a program that’s drawn criticism for subsidizing construction of homes vulnerable to damage or destruction. The White House plan would continue the insurance for existing homes within the 100-year flood plain, but discontinue it for any new homes in those zones. The proposal requires action by Congress, which have struggled to make radical changes to the program.
In addition to curtailing the coverage, the plan would give authority to the Federal Emergency Management Agency to cut-off coverage for properties that flood repeatedly.
Lawmakers face a deadline of Dec. 8 to reauthorize the program, and, as part of an emergency aid package for Puerto Rico, Florida and Texas, Trump asked Congress to write off $16 billion the program owes the U.S. Treasury.
Congress considered a similar proposal earlier this year, but the provision never made it into legislation, according to Rob Moore, a policy analyst at the Natural Resources Defense Council. "It’s really hard to read the tea leaves on this," Moore said.
Still, environmental groups say this is a rare policy idea in which they are in agreement with Trump.
"This sends a signal to developers and builders, and people living in flood-risk areas," said Laura Lightbody, director for the Flood-Prepared Communities project at the Pew Charitable Trusts in Washington. "We want less people in harm’s way, and less development in these coastal areas and riverine areas."
Lightbody said the change could have another benefit: making it easier for local officials to restrict development along the coast. Tighter rules on flood insurance "gives them political cover to make those decisions," she said.
In Florida, the change would "absolutely" reduce the number of houses built along the state’s coasts and rivers, said Rusty Payton, chief executive of the Florida Home Builders Association.
"It would be a huge deal in Florida," Payton said in a phone interview. "Right now there is not a viable private market" for flood insurance.