In Budget 2023, the government unveiled plans for a national flood reinsurance program and a separate insurance subsidy for high-risk households. Budget 2024 expanded on this by proposing a Canada Mortgage and Housing Corporation (CMHC) subsidiary to deliver the flood reinsurance program, but the announcement was light on both details and funding.
Budget 2024 proposes to provide $15 million to CMHC for 2025-26 to advance the implementation of a national flood insurance program by 2025. This funding is in addition to the $31.7 million seed funding from last year to help create flood mapping and lay the groundwork for the broader program. Yet, $15 million falls far short of what is needed to launch a reinsurance program capable of providing adequate flood protection to the 1.5 million Canadians at risk. It remains unclear how much progress has been made in moving this initiative forward.
Recently, the Quebec government released flood maps that identified around 77,000 Quebec homes in flood zones, with approximately 1,800 of these in the Pierrefonds-Roxboro area of Montreal. Concerns are rising among residents about how this zoning will impact their home value, marketability, property taxes, and insurance rates. A class action effort is already underway to challenge the map.
The current situation poses a moral hazard. Disaster assistance is essentially free insurance paid for by taxpayers, which does not create incentives for homeowners to take proactive measures to mitigate their flood risks. Clear action must be taken to address this issue.
One would expect more public engagement from CMHC by now on how this program will function. Key questions remain unanswered:
- Will there be any exclusions?
- Will this discourage new housing development in high-risk flood zones?
- Will insurance premiums be risk-based, and how will they be phased in?
- How will CMHC address the needs of low-income households that may struggle to afford these premiums?
- What incentives will be offered to encourage flood resilience, such as reducing runoff or physically protecting properties?
Adding this to the ongoing housing shortage, the lack of clarity around flood insurance could exacerbate the challenges we already face. If CMHC doesn’t get ahead of this issue, it risks deepening the housing crisis.
So far, CMHC’s spending in this area has been limited. Online reports of their procurement expenditures indicate about $360,000 has been spent on data and risk models. It would be helpful if CMHC took a more proactive approach and clearly communicated how it plans to deliver on this plan. While there may be consultations happening with insurers and provinces, direct communication with the 1.5 million Canadians affected would be a significant step forward.
Independent Opinion
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