(Bloomberg) -- President Donald Trump proposed endingfederal flood insurance for new homes in areas most at risk offlooding, a change that could curtail new construction in vastparts of Florida, Louisiana and along the EasternSeaboard.

Trump’s plan would radically overhaul the program created in1968 to help protect homeowners who live along coasts or nearrivers. The idea, sent by the White House to Congress, created anunlikely set of responses: Home builders warned it could stifle theeconomy while climate activists, who have battled Trump, called theidea smart.

Related: The self-defeating cycle of floods and federalaid

Letter to Congress

On Wednesday Mick Mulvaney, the director of White House Officeof Management and Budget, sent a letter to Congress calling forchanges to the taxpayer-subsidized National Flood Insurance Program, which is $25 billionin debt thanks to ever-worsening storms. Mulvaney’s proposalsincluded preventing homes built in flood plains after 2020 fromobtaining insurance under the program. Those homes could insteadseek private coverage, which is often prohibitivelyexpensive — if it’s available at all.

Home builders oppose idea

The National Association of Home Builders said it strongly opposedthe idea, arguing it would "harm local communities and impaireconomic growth."

"It would simply prevent home builders from being able toprovide safe and affordable housing," the association’s chairman,Granger MacDonald, said in a statement. "Why does OMB needlesslypropose to penalize new construction?"

The federal government provides flood insurance to those at riskthrough a program that’s drawn criticism for subsidizingconstruction of homes vulnerable to damage or destruction. TheWhite House plan would continue the insurance for existing homeswithin the 100-year flood plain, but discontinue it for any newhomes in those zones. The proposal requires action by Congress,which have struggled to make radical changes to the program.

Cut-off coverage

In addition to curtailing the coverage, the plan would giveauthority to the Federal Emergency Management Agency to cut-offcoverage 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, Floridaand Texas, Trump asked Congress to write off $16 billion theprogram owes the U.S. Treasury.

Related: Trump FEMA chief supports cutting coverage forflood-prone homes

Congress considered a similar proposal earlier this year, butthe provision never made it into legislation, according to RobMoore, a policy analyst at the Natural Resources Defense Council. "It’s reallyhard to read the tea leaves on this," Moore said.

Environmental groups agree with Trump

Still, environmental groups say this is a rare policy idea in whichthey are in agreement with Trump.

"This sends a signal to developers and builders, and peopleliving in flood-risk areas," said Laura Lightbody, director for theFlood-Prepared Communities project at the PewCharitable Trusts in Washington. "We want less people in harm’sway, and less development in these coastal areas and riverineareas."

Lightbody said the change could have another benefit: making iteasier for local officials to restrict development along the coast.Tighter rules on flood insurance "gives them political cover tomake those decisions," she said.

Related: Homeowners trapped by repeated flooding under NFIP,report warns

Elizabeth Thompson, a spokeswoman for the national homebuilders’ group, said building a private flood insurance marketwill take time.

"Many lenders do not consider private insurance as equivalent orbetter than the NFIP’s coverage and therefore do not accept it,"she said in an email. "There are bills in the House and Senate toease those requirements; however, it may take years for a privatemarket to develop."

'Huge deal in Florida'

In Florida, the change would "absolutely" reduce the number ofhouses built along the state’s coasts and rivers, said RustyPayton, chief executive of the Florida Home Builders Association.

"It would be a huge deal in Florida," Payton said in a phoneinterview. "Right now there is not a viable private market" forflood insurance.

Related: Dismantling the NFIP monopoly

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