Should Taxpayers Subsidize Insuring Homeowners Against Climate-Change-Induced Flood Damage?

The problem of who should bear the costs of climate-change-induced rises in flood frequency in coastal communities is difficult even before throwing in the not-trivial problem that is it also highly politicized. And as readers will see from the stalemate over what to do about Federal flood insurance subsidies, even coming up with “kick the can down the road” remedies is fraught. They also fall well short of what long-term solutions look like, since they ultimately involve relocating some, perhaps lots, of people away from these areas and coming up with more comprehensive approaches to community development (I’m reminded of a Jay Leonhardt song on global warming, which includes: “Goodbye Miami, goodbye Lauderdale/Pass me a bucket, pass me a pail”).

And if you think that because you live comfortably inland, this discussion doesn’t affect you, think again. The insurance program under discussion, called the National Flood Insurance Program (NFIP) went from being more or less breakeven for decades (as in it actually once worked as insurance) to being $24 billion in the red thanks to more frequent and severe storms. The current political row that people outside flood-prone states haven’t heard of is over a bill to restore the program to break-even by raising premiums back to a viable level. But “viable” is now so high in many cases as to be unaffordable to homeowners. So whose ox is to be gored?

*Note* This topic is sufficiently large that I’m only going to address some of the major issues in this piece. I anticipate returning to it and drilling deeper.

Background: Climate Change Threatens Settled Communities on a Mass Scale

Ironically, even with the flood insurance debate putting some of the tangible costs of climate change in the spotlight, the US is less at risk than many developing economies. James Boyce of PERI at Amherst explained the issue in a recent Real News Network interview about Typhoon Haiyan, which devastated the Philippines.

Well, as all of the news stories always repeat, one can’t draw a connection to say that any specific event was caused by climate change. But what we can do is we can look at the statistical probabilities associated with events and we can see how climate change affects them.

Perhaps the easiest way to explain this is by means of an analogy. Say we’ve been playing a game of Russian roulette. We’ve got six chambers in the gun. We put a bullet in one. And once a year, we hold it up to our heads and we pull the trigger. Say that’s the game we’ve been playing. And now we’re going to change the game. We’re going to change the climate, so speak. And instead of doing that once a year, we’re going to do it once a month. And instead of having only one bullet, we’re going to have three bullets in the six chambers. Now we start playing the game again. Well, you know that what’s going to happen when you do that is you’re going to see a lot higher incidence of people getting killed. Right? One can’t say for any given person who got killed that they wouldn’t have been killed in the old game and it’s the new game that killed them, but what one can say is that the frequency of deaths is going to change. The frequency of climate-related disasters is changing.

In the case of the super typhoon that struck the Philippines, this was not only a question of frequency, but also a question of intensity. And for that, another thing we know from the science is that as the climate changes, the damages that are done by events like typhoons not only go up, but they go up much faster then the wind speed of the typhoon itself in this case. It’s not the case that doubling the wind speed from 100 miles an hour to 200 miles an hour doubles the damage. Instead, the relationship is such that basically doubling the wind speed makes the damage go up by about 250 times. And the wind speeds in the super typhoon in the Philippines are estimated to have come close to 200 miles an hour.

So we’re talking about devastating events happening with increasing frequency around the world. And that’s a connection that I think is apparent to anybody who really looks closely at the problem.

And this is a serious issue on a global scale. As Edward Barbier wrote at Triple Crisis in November:

First, coastal population densities across the globe are nearly three times those of inland areas, and they are increasing exponentially. Thus, as population grows, we are packing more people into our coastlines than ever before.

Second, many estuarine, coastal, and marine ecosystems naturally protect coastlines from storm surges, wind, flooding, erosion, and other storm impacts, but as coastal development and populations expand, these systems are disappearing rapidly. Their resulting loss and degradation due to human activities is intense and increasing, such that 50% of salt marshes, 35% of mangroves, 30% of coral reefs, and 29% of seagrasses are either lost or degraded worldwide. Such rapid deterioration of these systems is making coastlines more vulnerable.

Third, across all the cities worldwide, about 40 million people are exposed to a one-in-100-year extreme coastal flooding event, and by 2070, it will be 150 million people. Consequently, because of the growth of urban populations generally, and cities in coastal areas specifically, more and more cities are facing the growing risks of major storm events.

Efforts to Fix US Flood Program Illustrates Difficulty of Making Even Modest Changes

Now let’s return to the US. Congress passed the Biggert-Waters Flood Insurance Reform Act of 2012 to address the problem that a flood insurance program originally intended to remedy a short-term market failure was on its way to becoming a taxpayer subsidy to property-owners in flood-prone areas.

The main change was the in-theory simple fix of increasing rates to reflect the “new normal” risks more accurately. That included tasking FEMA to redraw flood maps, since area that had been thought of formerly as safe were increasingly exposed.

New Jersey Spotlight provided a good recap:

Congress created the National Flood Insurance Program in the late 1960s after Hurricane Betsy hit New Orleans, causing over a billion dollars in damage. Flood insurance was nearly impossible to secure from the private market, so lawmakers felt the federal government had a duty to step in and provide help to residents along the coast. The program was set up to be self-sustaining, borrowing from the U.S. Treasury only when necessary, and it generally worked for several decades. But beginning in 2005, Hurricanes Katrina, Rita, Wilma and several other storms caused it to blow through its budget and go $24 billion in debt.

With 5.6 million policyholders depending on the NFIP and costly natural disasters becoming more common every year, many lawmakers were concerned about its long-term sustainability. Indeed, a Congressional Budget Office study found that current premium rates were not enough to cover the program’s expected costs. There were also some who compared flood insurance to a Ponzi scheme and called for the government to get out of the business. “I would say that this is a program that would make Bernie Madoff blush,” said Michigan Republican Congresswoman Candice Miller, who introduced an amendment back in 2011 to eliminate the NFIP entirely.

In the end, the Biggert-Waters Act, which passed with overwhelming support, was seen as a compromise by continuing to provide a safety net for residents of flood-prone areas while making changes to help put the NFIP back on more secure financial footing….

Insurance rates could rise dramatically over the next few years for coastal residents rebuilding their homes who don’t elevate them to comply with the new FEMA flood maps. Secondary homeowners and business owners could see their flood insurance premiums increase 25 percent a year. For primary homeowners who don’t have to rebuild as a result of Sandy, the rate increases would kick in if there’s a lapse in policy, if they suffer severe or repetitive flood losses, or when they sell their homes. That could depress real estate prices along the Jersey Shore, since new homeowners might be willing to pay less for properties if they knew their insurance premiums would be much higher.

Those who do choose to elevate can file increased-cost of-compliance claims and receive up to $30,000 from their flood insurance companies, and there are Sandy-related grants to help offset elevation expenses, but for many, it’s still an expensive proposition. Caught between spending tens of thousands of dollars to elevate or possibly spending ten thousand dollars or more per year for insurance, some residents — particularly in working class communities like Asbury Park and Union Beach — might be unable to afford to continue living along the coast.

But as the new, higher flood insurance bills went out (for instance, homes sold after July 2012 no longer receive flood insurance subsidies), the howling started. A sampling of news stories:

Flood Insurance Jumping Sevenfold Depresses U.S. Home Values Bloomberg

St. Tammany Parish home builders group hears about Biggert-Waters Act flood insurance woes NOLA. Key quote:

Included were a house in Belle Chasse where the annual premium will rise from $600 to more than $17,000; a house in St. Petersburg, Fla., that will experience an increase from $1,000 to almost $11,000; and a car dealership in Slidell whose insurance premium will shoot from around $5,700 to more than $53,000.

Next front to fight flood insurance rate hikes: lawsuits Tampa Bay Journal

Rising flood insurance rates hits Marin harder than other Bay Area counties Marin Independent Journal

Scituate homeowner hit with $68,000 flood insurance bill, drops her coverage Boston Globe

Now there are no doubt cases where the new assessments can credibly be argued to be excessive. For instance, a NOLA story reported that Caitlin Berni, an analyst with Greater New Orleans Inc., claimed that the new FEMA flood maps didn’t include some levees and pump stations which would considerably reduce flood risk. But presumably an appeal process could be implemented to deal with cases like that.

Various efforts to “fix” the bill died in Congress before year end. A Senate proposal by Mary Landrieu of Louisiana was to delay the rate increases for four years. While the logic might have been to buy time to implement a more comprehensive set of revisions, these minimalist solutions often wind up being all that gets done. But the House version by Bill Cassidy, also of Louisiana, failed by virtue of being seen as too skimpy, in particular by delaying some hikes by a mere six months and by not providing relief to those who’ve received notices of premium increases or of ending subsidies on properties sold.

Given how important this issue is in states like Florida and Louisiana, it’s likely that this issue will be revisited when Congress is back in session.

But if you look at this from a broader vantage, the problem is being defined around the squeaking wheel, the pending insolvency of the insurance program, and not the vastly more important issue of doing triage on neighborhoods and communities: which are too much at risk to be viable long term (say to anyone other than someone wealthy who can afford to do extensive flood/storm proofing?). Are we better off trying to subsidize moving rather than subsidizing property-owners in place? What is the rationale for intervening to preserved these property values in the light of indifference to property rights and owner losses in other cases (foreclosure abuses, failure to apply pressure to servicers to offer principal modifications to viable borrowers, the goring of private and public pensions while top executive packages remain intact, the momentarily-at-bay efforts to cut Social Security and Medicare?).

A devil’s advocate might argue that they are no guiltier of getting the benefits of the modern American lifestyle (particularly car use and the inefficient, from an energy perspective, configuration of modern suburbs), so why should they suffer disproportionately? But city dwellers who use public transportation could just as easily argue that their way of living needs to become the norm and it’s time to stop giving handouts to support habits that over time are becoming costly.

I’m late to be reading Jared Diamond’s Collapse, and his first chapter describes how Montana would be in collapse were it not for trade with the rest of the US. He also sets forth how the various major constituencies: the old timers who farmed the land, mining interests, the wealthy who buy large plots but don’t spend much time in state, and the pro-growth, pro-developemt types, who want more aspirational wealthy to move in and buy nice homes, can’t agree on much of anything, let alone on sustainability. And we see a variant of this type of impasse with coastal flooding. The losses due to greater storm damage are baked in, although their precise incidence (in cost and location) can’t be determined now. It’s hard enough to reach agreement on how to distribute losses from broad societal issues even when their incidence can be estimated more accurately. Put more simply: this wee and comparatively simple case shows how ill equipped we are, societally, to handle the challenges facing us. And it isn’t clear that muddling through, which has worked pretty well so far, will suffice now.

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77 comments

  1. run75441

    In 300 Million and Counting Joel Garreau makes a comment worth repeating:

    “One is that to accommodate our growth of almost 1 percent a year—about 2.8 million new Americans annually—we have to build the equivalent of one Chicago per year. That’s not impossible. Lord knows we have enough developers eager to do the job. What’s more, if you fly across this country and look down, you will see that it includes a lot of emptiness. If you are among those people stuck in endless traffic jams from Boston to Richmond and from San Diego to Santa Barbara, you may find this hard to believe, but only 4 percent of all the land in the contiguous United States is urbanized, and only 5.5 percent is developed.” http://www.smithsonianmag.com/people-places/presence-oct06.html#ixzz2pEYFjoaf

    In Addison, IL near route 83 and Lake Street, Salt Creek would over flow its boundaries and return to the flood plains it had occupied for centuries which part of the town was built upon. The city and the county got together and moved the businesses and homes away from much of the flood plains returning that portion of the land to what it was meant to be, a flood plain.

    It may make sense to plan for the future in places such as the coast and in cities such as New Orleans. The ocean looks great when someone’s garage is not blocking the view.

    1. H. Richardson

      This looks like the beginning of an opportunity to make “our” coasts common property, as in National Seashore. It has worked on Cape Cod, which I will drive 50 miles to, even though I live 8 miles from the coast, because that nearby coast is blocked due to private ownership. These folks built on the water’s edge have had their day, let nature do its thing.

      1. run75441

        H. Richardson:

        I do not know how one person or a group of people can own a lake or shore; but, it happens. Lake Cazenovia in upstate NY is very much like that and surrounded by homeowners. There are two small spots where you can put into the lake; but, its view is pretty much restricted. I have kayaked that lake in the mornings wen the speed boats are racing up and down its 5 mile length. Great place. The same holds true for many of the lakes in Michigan and Wisconsin where I have also lived.

        1. Yves Smith Post author

          I know someone who owns a lake by owning all the acreage around it. And all the land around is elevated, so the lake is totally cloistered. About 100 minutes drive from NYC.

  2. JGordon

    “it’s time to stop giving handouts to support habits that over time are becoming costly”

    Well, when you get further into Jared Diamond’s magnificent book, “Collapse”, you will no doubt be astonished by just how foolishly and consistently societies always respond to imminent societal collapse (and Diamond does a good job of supporting his premise that societal collapse always comes about as a direct result of environmental collapse)–although individuals and small groups frequently can and do react constructively to collapse, even as the larger society around them slowly disintegrates and the lives of the greater mass of humanity because rather horrific. This is why I strongly distrust any top-down solutions your or any of the corrupt political leaders want to force on the rest of us; as a historical fact, top-down solutions are almost always guaranteed to destroy, or at least seriously impede, the few enclaves that are rationally and constructively adapting to the deteriorating conditions than to salvage anything useful of the larger (doomed) society.

    Also relating to Collapse, I am not surprised at all of the sheer and utter incomprehensible stupidity our political “leaders” are displaying with regards to the serious multiple crisis threatening us. It is a standard historical theme, as elucidated by Diamond, that leaders will near-universally always react in the absolute most brain-dead, idiotic, and psychotic way possible (see the Obama regime as a modern example) when confronted with existential predicaments. So the lesson here is that it’s a waste of time and effort to try to motivate leaders to act intelligently; that is time would be much more productively (and non-futilely) spent on other activities.

    Uh, anyway about subsidizing homeowners: it sucks for these people, but whenever a population of a certain species exceeds the capacity of the environment to support it, mother nature has a rather ruthless way of bringing that population back down to a supportable level. In other words, we can either use various techniques increase the life support capacity of the environment (which is what I have a large interest in researching and practicing), or we can die off. Which seems to be what most people prefer doing. So while it is certainly sad that these people are going to lose their property investments, it’s even more sad that at the rate we’re going there won’t be very many people around period in the not too distant future. That is how I see things.

    1. Banger

      Well, “leaders” is not how I would describe people who currently control the system. They, to be crude, a cabal of organized crime gangs. Leaders may someday emerge but the first myth that has to be shattered is that the current order is legitimate–it is not either in public or corporate sphere. Any decision about anything coming from that direction is worthless.

      1. jrs

        Question authority …. if the authorities are legitimate they’ll answer. :)

        (of course our ruling class is entirely illigitimate)

    2. jrs

      Subsidizing homeowners eh? I deliberately CHOOSE to rent IN PART because I see MAJOR climate chaos ahead. But nevermind, I better bail out the homeowners anyway. Can I help it that the masses prefer to bury their heads in the sand about this catastrophic reality?

      But that’s not the most disgusting thing. The disgusting thing is we can’t fund alternative energy, we can’t fund energy efficiency (insulation, passive solar etc.), we can’t implement carbon taxes, we can’t anything, but we can somehow bail out homeowners from climate change we do nothing to prevent. If the human species become extinct due to climate changes is there a bailout for that? Haha, stupid questions. These idiots know the price of everything and the value of nothing.

  3. Clive

    There is precedent for the forced relocation “option” (it is a bit of a horrid one for the people concerned so saying “option” sanitises it too much for my liking but I can’t think of a better word right now) — in the 1950’s and 60’s the huge expansion of tract development, not all of it of, erm, the highest quality when it came to the properties on the resultant subdivisions, sometimes incorporated septic tank sewerage systems.

    These septic tank systems not all that infrequently failed. In some cases, the FHA managed to strong-arm the builder into coughing up for mains sewer service connection. If not, they footed the bill themselves. But if a whole subdivision was, in effect, condemned because no-one would purchase the properties on the resale market and it was unpleasant if not actually unsafe for their residents to remain in them, the FHA would purchase the entire subdivision. Even, in rare cases, the whole tract. It was cheaper than the option to remediate and put in proper sewerage disposal infrastructure.

    So, if you live in a house purchased with an FHA underwritten mortgage, and the house is liable to flooding to such an extent that it is uninsurable (assuming the can kicking does indeed eventually run out of road in a compromise with the insurers) then it is, de facto, both uninhabitable and unsaleable. As, with the demise of private label securitisation, the FHA is the only game in town, I’m wondering if it is actively reviewing which plots it will underwrite a mortgage on in the light of a very high flood risk (say, greater than 1-in-10 year risks) and the possibility that a back-door bailout via an insurer compromise might not be possible or simply not worth it for these very high risk properties. Probably not. It’ll just end up, as usual, with the state bailing out good ‘ole private enterprise down the line even though it could have prevented the fleecing of the taxpayer.

    For the FHA insured back-book of mortgages, it would probably be more palatable to force a compromise with the insurers (and probably this will entail a sweetener to the insurers) to cover perhaps up to 1-in-20 year (appx.) flood risk properties. For 1-in-10 year flood risk properties, or worse, it’ll probably end up repurchasing whatever happens in negotiating with insurers and bringing in the bulldozers as the cost of a compromise with them is more than the cost of keeping the houses standing in the long term.

  4. GRP

    Why pay people to continue to inhabit risky areas? If the risky area has a significant economic value to the rest of the country, that would be reflected in the income of those serving the economic value and they should be able to pay the insurance premiums necessary. The others can move to safer places. Sure, real estate prices will drop, but should they not? There will be pains as the frequency of climate related disasters increases. It doesn’t make sense to pay them to stay in risky areas. If the society wants to share the pain, they can pay those in risky areas to move out.

  5. ambrit

    Friends;
    We have to do a day trip this morning, but this subject is dear to our hearts; we went through Hurricane Katrina, and the aftermath. The main experience we had was the ubiquity of ‘reactive’ solution making. When any ‘proactive’ solution making was encountered, it was of the neo-liberal Social Darwinian kind. (Not quite “Let them eat cake,” but more along the lines of, “Let them bake their own bread, after we give lucreative near monopoly contracts to the special interests to supply the wheat, flour mills, wood for fires, bricks to build the ovens to bake the bread etc. etc.”)
    As an afterthought, we moved inland to Hattiesburg Mississippi, one main reason being that it was barely above the 205 foot full melt out shoreline elevation for the post climate change world. Will we see that in our lifetimes? I hope not, but I’m not betting against it either. Stranger things have happened.
    I think I’m going to get a copy of Mr. Diamonds book. Thanks for the link.
    BTW, flood insurance isn’t the only problem. Watch out for general homeowners insurance, as in the stuff the banks want in place to underwrite a mortgage. That has gone through the roof here on the Gulf Coast too.

  6. DakotabornKansan

    How ill equipped we are, societally, to handle the challenges facing us…

    There are a significant number of people out there that refuse to accept the reality of climate change, much less agree on who’s going to pay for the damage.

    Science denialism is rampant…North Carolina passed a law against global warming science, therefore it’s not happening.

    Muddling through…

    Carl Sagan’s always relevant warning of the dangers of scientific ignorance in a democracy:

    “If the general public doesn’t understand science and technology, then who is making all of the decisions about science and technology that are going to determine what kind of future our children live in, some members of congress? There are only a handful who have any background in science at all, and some of them don’t even want to know about it.”

    “We’ve arranged a society on science and technology in which nobody understands anything about science and technology, and this combustible mixture of ignorance and power sooner or later is going to blow up in our faces. I mean, who is running the science and technology in a democracy if the people don’t know anything about it.”

    “One of the saddest lessons of history is this: If we’ve been bamboozled long enough, we tend to reject any evidence of the bamboozle. We’re no longer interested in finding out the truth. The bamboozle has captured us. It’s simply too painful to acknowledge, even to ourselves, that we’ve been taken. Once you give a charlatan power over you, you almost never get it back.”

    Jared Diamond writes, “Businesses have changed when the public came to expect and require different behavior, to reward businesses for behavior that the public wanted, and to make things difficult for businesses practicing behaviors that the public didn’t want. I predict that in the future, just as in the past, changes in public attitudes will be essential for changes in businesses’ environmental practices.”

    Man’s fatal flaw is misplaced optimism.

    “…population and environmental problems created by non-sustainable resource use will ultimately get solved in one way or another: if not by pleasant means of our own choice, then by unpleasant and unchosen means…” – Jared Diamond, Collapse: How Societies Choose to Fail or Succeed

    1. Banger

      Great Sagan quotes! Thanks.

      I want to be clear here. Though I believe that the heart trumps the head and that spirituality and mystical ideas are at the center of my life I still believe that one of the greatest tragedy of my lifetime is the conscious rejection of science and logic/reason that underlies the Western intellectual tradition by not just ordinary Americans but most of the mainstream media that believes that intellectual claims can be justified by the volume they are stated in and the celebrity and wealth of the speaker. Science is in part to blame by not making simple scientific ideas clear to the rest of us.

  7. JTFaraday

    “But city dwellers who use public transportation could just as easily argue that their way of living needs to become the norm and it’s time to stop giving handouts to support habits that over time are becoming costly.”

    Oh puhleeze, Manhattanites (and 5-boroughers)–you only think you live in “a city.” I know it’s difficult to stay connected to nature with all those tall buildings all around you all the time, but have you looked at a map?

    And I don’t mean look for the subway stops either. Talk about a disaster waiting to happen.

    A lot of people right across the bay (although admittedly far fewer) in NJ thought they dodged the bullet with minor damage from hurricane Irene in 2011, and then one year later– BAM!

    I think it’s worth discussing how we ought to live, but don’t think many major cities are really going to be standing on the moral high ground here.

    1. Yves Smith Post author

      New York City is not the only city where you can 1. Live in an apartment and 2. Not own a car. This is also true in Washington DC, parts of San Francisco, parts of Chicago, and parts of Boston. And I gotta tell you that there are poor people in way more cities who don’t have cars out of necessity and get by on lousy public transportation despite the sprawl and time costs.

      And this is not about Manhattan. If you care about energy conservation, single family homes need to be radically de-emphasized in favor of apartments and denser living arrangements where you can conduct your daily affairs on foot or by bike. In Europe and Asia, denser cities without much in the way of high rises are more typical. And many feature heavy use of public transportation and bikes: London and Tokyo (public transportation), Copenhagen, Stockholm, to name a few.

      And the high rises for residences are only Manhattan, and then only parts. Lots of people live in townhouses. And that’s much truer in Queens and Brooklyn and the Bronx, where more people live than in Manhattan.

      I don’t think high rises are necessarily the answer, but denser living most assuredly is.

      1. JTFaraday

        “This is also true in Washington DC, parts of San Francisco, parts of Chicago, and parts of Boston.”

        What do all those American cities have in common? They’re built on and around large bodies of water.

        Time to for the gentrifying new urbanites to drop the moralizing self congratulation about giving up the car (because they could afford the real estate, unlike the yokels) and move?

        Nothing along the rest of the shore will compare to sustaining that habit.

        1. Yves Smith Post author

          Now we’re having to engage in distortions and straw manning to continue the argument.

          I clearly stated as a matter of policy that we needed to encourage people to move out of areas at storm risk. That’s a higher standard than eventual climate-change induced water level rises.

          Have you looked at San Francisco? Hint: it’s not at sea level. Chicago is also not exposed to climate change induced storms either. You don’t see howling either in Manhattan or Chicago or SF ex Marin (rich and only property near creeks) over exposure to FEMA estimates of flood risk. Your “near bodies of water” = “always exposed to floods” is incorrect. This is very geography and elevation specific.

          And as for New York City, I repeat: there is plenty of cheap housing here. Go to Queens, for instance. The Big Lie is that there’s no cheap housing in urban areas. Not true. But the ‘hoods will be less glam than the ones that wind up in the movies.

          And Americans need to give up their love affair with the car. Fortunately, that’s already happening. Young people for the most part don’t see them as a status item or all that desirable. The auto companies are a bit freaked out.

          1. JTFaraday

            I suspect if you really put the theory that NYC and the 5 boroughs is energy efficient because it has a public transportation system to the test, it would turn out to be highly over rated.

            Not to mention that being there on any given day has to be a health hazard from the sheer concentration of environmental pollutants, and etc. God only know what health hazards the rest of the public is subsidizing there.

            Maybe you don’t notice it, because you live in that muck day in and day out.

            Everyone has their own preferred unsustainable sh*thole, and they’re going to rationalize their preference as long as they can.

  8. Dino Reno

    Notice: You Live In Flood Zone. This means that your house and all its contents will be destroyed from time to time. You and your pets may suffer loss of life. Your personal finances will probably be put under severe strain. Still want to live here because you like the view or the lifestyle or want to live close to your job? Then please sign this release form that holds harmless all the other Americans who don’t share your wiliness to risk everything to live there, wherever there is.

    Hey, I’m not my brother’s keeper when it comes to picking a place to live. That is a personal choice. If you want to build on an eroding bank overlooking a river or an ocean, be my guest.
    Don’t ask me to cover you in case of loss because there are other livable options. You just don’t like them as much.

    Getting old and sick is not an option and should be placed under a security blanket by a responsible society. Living on a beach in Malibu should not involve cost sharing.

    1. JTFaraday

      No offense, but in a real climate change scenario that logic does not work.

      Before there were horseless carriages to tote people and things around, where do we think most of the country, and most of the country’s business–you know, the “job creators,” etc– saw fit to plop itself?

      1. Dino Reno

        All those job creators need to slap a big old tax on themselves for staying put since the age of sail and build a nice big flood protection project that will keep them dry another couple hundred years.

    2. diptherio

      And if you were born in one of those areas and have never been able to afford to move? What if you’re employer transfered you there…or the military? Oh, and let’s not forget that our inland supply chains tend to start in coastal cities. We’ve all got skin in this game, like it or not.

  9. washunate

    Great read. I am firmly in the camp that the idea that we should subsidize flood insurance is one of the myriad of policy mistakes that in aggregate create concentration of wealth and power.

    Either property should be owned by the individual, with the inherent risks and opportunities borne by the individual, or it should be owned by the state. This is the insanity of our entire system of handling real estate, from subsidizing flood insurance to the home mortgage interest deduction to the bailout of the GSEs to low-down payment loans backed by agencies like FHA and VA to the utter lack of prosecutions of systemic fraud and other predatory abuse.

    As a group, homeowners are vastly wealthier than non-homeowners. A policy that raises the price of real estate is almost by definition regressive.

    1. liberal

      Either property should be owned by the individual, with the inherent risks and opportunities borne by the individual, or it should be owned by the state.

      People have already come up with a far better solution: land value taxation. In fact, they came up with it over a century ago.

  10. Bridget

    I don’t know why the issue needs to be tied to climate change. The fact is that more, and also more expensive, housing is being built along waterfront properties. The very existence of a subsidized insurance program encourages risky development as well as rebuilding in inappropriate flood damaged areas.

    And oh, by the way, did I mention what kinds of people tend to build expensive waterfront housing?

    Another issue on which Libertarians and Progressives can find common ground. Preferably on the high ground. :)

    1. Yves Smith Post author

      Did you miss the fact that this becoming a political hot potato is driven by climate change? The old insurance rates were viable until storms became more frequent and more severe. And go read the articles on how much the premiums are increasing as a result. We are talking both very large (as in integral multiple) increase in rates AND people who formerly weren’t in flood prone areas now being at risk.

      1. optimader

        Whether driven by (anthropomorphic) climate change or by purely “natural” processes (indeed the climate is always changing) invoking the climate change tag provides some red meat to value diminishment attribution — deflecting responsibility for property value away from the property owner and applying it to “society”. An interesting topic for debate.

        Considering hypotheticals like the revolver analogy at its limits, as more bullets are chambered and the frequency of pulls increases the probability approaches Unity and it ceases to be a game of chance. The revolver might as well be a semiautomatic with a full clip.
        Analogously the home insurance ceases to be insurance and starts looking more like assurance, as in a life assurance model where the final outcome has 100% probability, death ( loss of house), and this endpoint is built into the actuarial model.
        The philosophical question remains, is a property owner ultimately responsible for evaluating all risks and benefits, obvious and less obvious (–excluding those fraudulently withheld of course) when acquiring property? Yeah I think so.
        Is there a possibility to being exposed to a trend of catastrophic conditions unique to a coastal region property? Yes
        Are there risks to being exposed to trend of catastrophic conditions unique to a geologically active region? Yes.
        Are there risks to being exposed to trend of catastrophic conditions unique to a desert region without a sustainable indigenous water supply? Yes.
        Are there benefits to living in these areas that many feel outweigh the risks? Apparently yes.
        Should someone living in, lets say Detroit MI, be subsidizing the cost to live in these areas without accruing the benefits that justify those risks? MMM. Probably not.

        As someone up tread points the economic benefits should be in equilibrium with the the cost of living in any geographic location. If it isn’t then it is unsustainable as private property.

      2. Bridget

        Why no, I didn’t miss it. That’s why I said there’s no reason to tie the issue to climate change. Doing so ignores the fact that the flood insurance program as currently constructed is not financially viable, period. Even if the horribles of global warming never materialize, it’s an unjustifiable subsidy with perverse incentives . And it’s not limited to coastal communities, it’s spread over every creek and river in the country.

        1. Yves Smith Post author

          Um, your remark proves you did. The flood insurance program was self supporting till recently. It was NOT a subsidy. Basically, too many property and casualty insurers rely on reinsurance. They also underprice in “soft” markets. When storms hit, they can blow thorough their “cat cover” (reinsurance) and are terrified because they are naked v. losses that year beyond that. They freak out and buy extra cat cover at inflated prices (Berkshire Hathaway makes a fortune sitting around waiting for this to happen). The insurers then spend the next year or two jacking up their prices to restore their profits after having bought cat cover at insane prices in a panic. That is the market defect that the Federal program addressed, and it was self-financing for over 30 years. It is widely acknowledged that climate change is producing more frequent and severe storms. It is that change which has led to the need to both raise insurance prices and redo the flood maps.

          1. optimader

            “It is widely acknowledged that climate change is producing more frequent and severe storms.”

            http://www.accuweather.com/en/weather-news/severe-weather-and-climate-change/62715

            “…Future Climate Change Impacts on Severe Weather
            There are still many limits to our knowledge of how severe weather will change as the climate warms, but some preliminary conclusions can be made from research so far.

            “As the planet warms with more greenhouse gases, we really don’t have very strong evidence as to what will happen with severe thunderstorms,” Brooks said.

            Key ingredients for severe thunderstorms include warm, moist air to fuel thunderstorm initiation and growth and winds that change with altitude, or wind shear, to help organize a thunderstorm and create rotation. Big changes of wind with height, or high wind shear, are especially important for tornado and hail formation.

            “As the planet warms, the moisture content of the atmosphere will also increase. And that’s the basic fuel that drives thunderstorms. It’s where the storms get their energy from… as we warm the planet that will increase the energy available for producing storms,” Brooks explained. “The other primary ingredient, the shear that organizes the storm, is likely going to decrease.”…

            The wind shear will likely decrease due to a lower temperature contrast from pole to pole.

            Since one major factor favors a more conducive environment for severe thunderstorms to spark with a warming climate and another is less conducive for severe thunderstorm organization, it is very difficult to determine how severe weather will change in the future.

            “We may see a shift toward non-tornadic wind storms in the future, but that’s still a preliminary result,” Brooks added. Straight-line winds may increase since high wind shear is not as much of an influence, while the frequency and strength of tornadoes may not change very much.

            It is difficult to conclude confidently whether the regions that get the most severe weather and tornadoes will shift as the climate warms.

            “The balance of the ingredients that we need [for severe weather and tornadoes]… are tied to really large-scale features on the planet,” Brooks stressed. “Like the presence of the Rocky Mountains and the Gulf of Mexico. Since they aren’t going to move in the future, the regions where tornadoes occur are likely to be tied to their relationship to those two features.”

  11. Brooklin Bridge

    Obviously we should be addressing climate change first and foremost. That’s what is creating the weather that destroys the coast (among other things). We should be taxing the hell of the rich to bring carbon emissions to a halt as quickly as humanly possible.

    So instead, we address the issue of what those poor rich people who are kicking everyone else off the coast will do if they are not fully subsidized for any loss to their absurd mansions along the shore and for that matter to the sandy parts of the shore itself that the rich use for state subsidized private fun in the sun, but not to the grasslands or marshes, or estuaries (except insofar as those areas remain good stock, protected from development for use by ordinary folks but not by the rich who can always get variances for development when ever the next generation of their kids, our beloved American aristocracy enriched and supported by big oil and fraking and every manner of climate change creation and pollution, is ready to bless the rest of us with their sewage).

    Every time a major storm occurs, more ordinary folks are wiped out literally and then priced out of their homes along the shore and those assets are snapped up for pennies on the dollar by the very people who get the oil and gas out of the ground and enrich themselves by the insane carbon economy that causes the storms. I don’t see where the post covers this issue and without doing so, I wonder who will benefit by such an insurance program. The only thing I know for sure, and that is not covered at all in this article, is that the middle class and the poor -if there is still a distinction- will pay for what ever solutions our congress can come up with all as they are moved further and further away from enjoying any benefits of that sacrifice.

    1. JTFaraday

      I didn’t really read it as ignoring the issues you raise. I read it as suggesting that the rising cost of flood insurance will price people out of their homes–and, let’s add, increase the costs of rent in affected areas, (which it will).

      The only way to make this more affordable to ordinary people is for the government to subsidize it in some way. Those people who are literally buying up the beach, per se, probably don’t need the subsidy, (although they’re also more likely to have an impact on the government than anyone else would and get the subsidy).

      The larger question is, should we subsidize life in the flood plains, as is, or should we rethink our living arrangements entirely.

      1. Brooklin Bridge

        No, there is no attempt to make this insurance affordable for ordinary folks. None. The only efforts being made in that direction are to ensure the insurance is UN_AFFORDABLE to ordinary folks. Have you looked at the cost of those insurance policies even subsidized? Have you looked at the cost of conforming to the new regulations the insurance companies insist on before insuring a house? This is using catastrophe created by the rich as part of a systemic land transfer process for the benefit of the rich. In the same way we subside medicine of, by, and for the rich on the countless deaths and the immense physical, emotional and financial suffering of the little guy. The irony and sheer ruthlessness of it is breathtaking

        If the super rich want the coast, let them protect it by addressing the actual problem that is putting it in jeopardy, CARBON EMISSIONS, not by ignoring the causes of climate change all together and getting the rest of the country to subsidize staggeringly expensive levies and sea walls and beach-for-the-rich erosion programs JUST to protect THEIR gated communities from the problems they are creating!

        1. JTFaraday

          My point in replying to you at all is to disagree with your claim that the post completely ignores these issues. Also, note the disclaimer:

          “*Note* This topic is sufficiently large that I’m only going to address some of the major issues in this piece. I anticipate returning to it and drilling deeper.”

            1. JTFaraday

              No, you have you have your panties in a bunch and you’re in a tizzy, yelling at all the wrong people.

        2. Brooklin Bridge

          Should have said, “The only efforts being made in that direction are to ensure that insurance is UN_AFFORDABLE to ordinary folks while still being as cheap as possible for the rich.” That line is the only line being “calculated” at present in the halls of our ” representative” government and the board rooms and math departments of our insurance companies.

          1. Yves Smith Post author

            Since when is a $48,000 a year policy affordable, or even sensible, for someone rich? The rich have options, and I guarantee it’s cheaper to buy or build someplace better located (as in coastal but better off). How about the entire state of Maine, where very little costal property is sea level (Maine has just about no beach and a rocky coastline) or Oregon (rocky coast like northern California)?

            This isn’t about favoring the rich. Look at the howling from Marin County, which last I checked is full of rich people too. They are hopping mad about the increases they are facing. The rich just happen to be better positioned to cope with losses than less well off people. And some can capitalize, but go look at flood prone areas of England, like near Oxford. Really flood proofed properties are built a full story off ground.

            1. Brooklin Bridge

              I disagree that, “This isn’t about favoring the rich” and since when do the rich not howl about how unfair things are for them? Just because they complain about the cost of flood insurance doesn’t mean it isn’t favoring their continued enjoyment of those areas at the cost of others exclusion.

              Perhaps I misunderstand you points above, but generally the land along coastal areas has become progressively reserved for the wealthy over my lifetime and that has increasingly come to mean whole communities of coastal areas (such as Marblehead in Massachusetts). I believe buying a property on the coast of Maine is now priced in the millions, or at least beyond the reach of the average homeowner. The phenomenon is pronounced enough so that one would imagine it being part of a discussion about flood insurance for coastal property and who really benefits from it.

              In Massachusetts, and I suspect Rhode Island, Conneticut and New York, and…, one sees more and more mansions populating the waterfront where $48,000 a DAY would be considered pocket change, but even admitting those are the exceptions, they delineate a significant trend. Moreover, once you get to populations that are really significant, as in whole coastal countries, or areas such as Florida, one has to wonder if insurance is as cost effective as addressing the core problem of climate change in the first place.

              If I followed events correctly, the flood tragedy in New Orleans resulted in large swaths of poor being dislocated permanently and at least some of the areas they vacated being re-purposed for the affluent. The cost of insurance is part of that as is the codification process that requires any re-building be done by standards that ensure the structures are storm proof. The facts of climate chage are that you simply can not ensure structures on the ocean front are storm proof. You can only price them beyond the means of ordinary homeowners to afford.

              I’m not against flood insurance, nor am I oblivious to the need of protecting large swaths of our population, but I think any discussion of it, and particularly of subsidizing it, needs to address the problem of who is getting the overwhelming benefit from it.

              1. JTFaraday

                It sounds like you’re laboring under the delusion that flood insurance is primarily so the wealthy can protect their multi-million dollar spreads on the coast.

                This is not true. Every squatter who gets a mortgage in every flood plain on every podunk river in the country has to carry flood insurance.

                People who got hit by Sandy who didn’t carry flood insurance because they inherited their houses, and nobody “forced” them to get it, got wiped out.

                Saying it shouldn’t be an issue because wealthy people benefit from it too just about guarantees that only wealthy people will live in flood plains, sexy ones and unsexy ones alike.

                1. Brooklin Bridge

                  You are right that I was under the “delusion” that flood insurance for coastal communities was a separate policy than for other flood prone areas (and to some degree also that I have my panties in a bunch on the issue).

                  But I was not wrong that by design or by circumstance the high cost of flood insurance provides a distinct advantage to the wealthy in coastal areas or for that matter in any areas where real estate of limited supply is desirable. Also, regardless of flood insurance, homeowner’s insurance is unobtainable unless a house meets building codes either by grandfathered rights or by meeting current requirements. So after each one of the climate change generated storms, many ordinary homeowners are indeed priced out of their damaged homes because they are not allowed to repair them without bringing them up to code (at ruinous expense) and therefore they can’t get them insured and therefore they are in violation of their mortgage and thus progressively susceptible to the loss of their homes at fire-sale prices. Guess who buys up those lots of scarce coastal real estate?

                  No matter who we have governing, It would be pretty safe to bet that flood insurance will not be reduced to the point the average homeowner can afford it nor will subsidies be available to bring damaged homes up to ever more stringent codes and while this will hurt the average home owner in non coastal areas as well as in coastal areas, it will not hurt the rich in areas they don’t care about and it will advance their interests in areas they covet. If this is not at least partly by design, you can be sure that it’s non resolution will be.

                  Below Yves points out that the government isn’t even asking the right questions such as whether single family homes are the right way to go, and with this I completely agree. For instance, if people want to repair their home as best they can, why should they have to meet such stringent requirements and who really benefits from that? We get to claim moral superiority for insisting on safety, the rich get to take over their desirable locations, and they get the wide out-of-doors or wherever it is that they end up.

                  I did not say flood insurance, or any of the host of problems that climate change will bring, shouldn’t be an issue although I still feel that first and foremost we should be addressing the cause of climate change and I am puzzled at how a government can effectively address the problems created by something they don’t even admit exists. Rather, I said that I didn’t see where the issue that these policies always favor the wealthy was addressed in the post.

                  1. JTFaraday

                    I can’t say what they think of “climate change.” They’re probably more convinced by resource depletion.

                    I do think at some point they will want to bring some industry back to the US instead of shipping crap all over the place, and they will want it to look like China, with dorms, etc, because you know, why do we think our untermenschen should have anything better in a global economy?

                    So, there won’t be a plan because if you planned it you’d plan something better for your fellow inhabitants. Instead, it will just happen, like industrial revolutions everywhere.

                    Meanwhile the FIRE sector will keep on sucking out everything it can, while encouraging us to blame its victims.

                    People who are unsympathic, because they’re buying up the beach, are the perfect headliners for this.

            2. Bridget

              Why no, I didn’t miss it. That’s why I said there’s no reason to tie the issue to climate change. Doing so ignores the fact that the flood insurance program as currently constructed is not financially viable, period. Even if the horribles of global warming never materialize, it’s an unjustifiable subsidy with perverse incentives . And it’s not limited to coastal communities, it’s spread over every creek and river in the country.

              1. Yves Smith Post author

                You are really choosing to ignore what was written and just keep yelling your point after I debunked it.

                Let me repeat: this was not a subsidy prior to climate change. The program was self funding. No government transfer involved.

                I explain the market defect, which is basically predictable P&C insurer stupidity, here:

                http://www.nakedcapitalism.com/2014/01/taxpayers-subsidize-insuring-homeowners-climate-change-induced-flood-damage.html#comment-1793251

                The economics of how you price the insurance changed due to climate change. The Feds are now repricing the insurance. Howling ensued.

                So we went from a program that was not a subsidy to homeowners to one that VERY RECENTLY became one.

                You’ve consistently run climate change denialist talking points on this blog. Your bias doesn’t change facts, nor does engaging in broken record tactics amount to effective or even honest argumentation.

                1. Bridget

                  “You are really choosing to ignore what was written and just keep yelling your point after I debunked it.”

                  Sheesh, that was an inadvertent double post, not yelling. Moreover, it was made in response to a comment from you…unless I’m not supposed to respond?????

                  “Let me repeat: this was not a subsidy prior to climate change. The program was self funding. No government transfer involved. “

                  20% of the policies were, in fact, subsidized.

                  http://www.cbo.gov/sites/default/files/cbofiles/attachments/SenateFloodBill.pdf

                  “Throughout the program’s history,
                  FEMA has charged premiums
                  well below the amount necessary to
                  offset the expected cost (a
                  lso known as the full-risk or
                  actuarial cost) for properties built before
                  a community’s Flood Insurance Rate Map
                  (FIRM) was completed, or be
                  fore 1975, whichever is later. Those properties, known as
                  pre-FIRM properties, make up ov
                  er 20 percent of all NFIP po
                  licies. “

                  “Nonetheless, because of the large subsidy that
                  exists for many policies, CBO estimates that
                  the program will—on av
                  erage—have greater
                  annual expenses than revenue. This differe
                  ntial became apparent in the aftermath of
                  Hurricanes Katrina, Rita, and Wilma in 2005.
                  Because of the severe and widespread
                  damages experienced during those storms,
                  the program borrowed an unprecedented
                  $16.7 billion in fiscal year 2006
                  to cover claims and interest
                  expenses. NFIP’s current debt
                  to the Treasury stands at $17.8 billion.”

                  “The economics of how you price the insurance changed due to climate change.”

                  As far as I can tell, the program got into serious trouble because of Katrina and Sandy, so if you believe that climate change caused Katrina and Sandy, then your statement would be correct. But if you know anything about New Orleans, you know that they knew years before climate change became an issue that it was just a matter of time. And as for Sandy, it was indeed a very expensive event. Maybe because of all of the coastal development fueled by the perverse incentives of the flood insurance program?

                  “You’ve consistently run climate change denialist talking points on this blog. Your bias doesn’t change facts, nor does engaging in broken record tactics amount to effective or even honest argumentation.”

                  Really? This is your idea of climate change denialist talking points?

                  “I don’t know why the issue needs to be tied to climate change. The fact is that more, and also more expensive, housing is being built along waterfront properties. The very existence of a subsidized insurance program encourages risky development as well as rebuilding in inappropriate flood damaged areas.”

                  I support changes to the flood insurance program, just as I support clean air and water initiatives and renewable energy because I believe that there are very good reasons other than climate change to do so. That way I don’t get hoist with the climate change petard if it fails to pan out.

                  1. Yves Smith Post author

                    You have now shifted the grounds of your argument.

                    My point was that the program IN AGGREGATE was self financing, a response to insurers periodically blowing through their catastrophe cover, and then jacking up rates and in some areas, not offering coverage at all until they’d recovered from their losses. Your argument about some people who received insurance getting rate breaks (in this case, due to grandfathered status) doesn’t negate the point that the program didn’t require government subsidies (payments by taxpayers). So the original point still stands.

                    As to your claim re Sandy and Katrina, that is also off point and the post already addressed that. See the James Boyce extract in the post (and separately, the fact that Sandy was such a large, late season and powerful storm so far north was the direct result of much warmer than historical norm ocean temperatures, a direct result of climate change). There is no controversy over the fact that climate change will produce more frequent and severe storms. That is why the FEMA redo of flood maps (which is a periodic exercise) is producing such significant increases in expected costs and number of houses included.

                    Moreover, Katrina in particular was NOT inevitable, the destruction of that storm was to a considerable degree due to human negligence. Harry Shearer did an entire documentary proving that. See key points here: http://www.democracynow.org/2010/8/30/the_big_uneasy_in_new_doc

                    1. Bridget

                      “Moreover, Katrina in particular was NOT inevitable, the destruction of that storm was to a considerable degree due to human negligence.”

                      We are in complete agreement on at least one point. The destruction of Katrina was due to a considerable degree to human negligence. I appreciate the response and the opportunity to be heard.

  12. Jeff N

    With the gentrification of the big cities, while anti-99% agendas are implemented (cough Rahm Emanuel cough cough), the urban poor get driven to certain suburbs, where there is even less of a tax base to help them.

    My small suburban house (1,134 square feet = “hell” spelled upside down on a calculator = around 10 yards long x 10 yards wide) gets pummelled a couple times per year by snow and/or rain. Barring any personal setbacks, it will be paid off in 2025. I’m hoping to use it as either a place to live/retire, or I can sell it and use the proceeds to pay rent until I die. How much less will it be worth as global warming wrecks everything? Will global warming cause a deflationary effect, or can the implementation of workarounds (=moving people around) stimulate an economy?

    My house is within walking distance of a (commuter) train station, for a line that only goes towards downtown Chicago, with peak service during rush hours only. I don’t (currently) work in Chicago.

    And that’s another thing that’s always bothered me; why is public transportation built around 9-5 working hours? If you think about it, that most benefits businesses, who can never be bothered to fund public transportation.

  13. Synoia

    Yes, taxpayers should continue to subsidize home built near he coast. Especially the high end coastal properties bordering the shore with panoramic views of the ocean.

  14. Paul P

    Why single out the coastal homeowner? The unemployed are involuntarily unemployed. Shouldn’t they get a subsidy? Hedge fund managers get taxed at lower rates than their secretaries. They get subsidies. The Fed provides subsidies to stock owners by giving a bounce to stock prices with its QE. The mortgage interest tax deduction is a subsidy to homeownership (and our biggest housing program by far). Let’s throw that into the pot. And, on this site, we can’t leave out the financial bailouts, with no conditions, and ongoing TBTF subsidies. Maybe the fossil fuel industry should pay for the insurance? Our foreign policy and military industry is a subsidy for them.

    Within ten years, the storms, floods, heat, and drought will have decided the climate change ‘debate.’ In another ten years, the mad scramble for real solutions will begin. In our world, the real solutions will be geoengineering of the climate. A good companion to The Collapse is The Road.

    1. Yves Smith Post author

      Having a job is essential to survival and being unemployed is a condition most people are desperate to escape. Living in coastal properties by contrast is a highly desirable place to be. And it’s not just that this type of living in some places is not just riskier but even not sustainable. It’s that single family home living is increasingly a model we can’t afford as a society at the level we have it now.

      I’m not arguing that the government shouldn’t do something here, but that the right questions aren’t even being asked, much the less addressed. And you are promoting precisely the wrong sort of thinking, which is “I gotta preserve mine, the hell with the rest of you.”

      And the hedgie argument is weak. Two wrongs don’t make a right and everyone credible opposes the loophole that lets hedgies structure their affairs to get taxed at a lower rate, but the hedgies buy enough politicians to allow them to preserve that abuse. So you are saying everyone should be allowed to loot too? That in the end leads only to less confidence in government, and that means the rich get to continue to loot but the subsidies to the middle class get whacked. You lose not win long term by trying to argue for a right to loot. The fact that hedgies loot isn’t a justification for other people looting. And the Fed’s policy (and the Fed is the worst sort of de facto public-private partnership) is based on the delusion that rising asset prices = more wealth to the community. They do until the bubbles burst.

      1. Brooklin Bridge

        I’m not arguing that the government shouldn’t do something here, but that the right questions aren’t even being asked, much the less addressed. -Yves

        I may have indeed been barking up the wrong tree above.

    2. jrs

      “Maybe the fossil fuel industry should pay for the insurance?”

      That’s a really good idea. High time they paid the externalities, tax them for the damages.

      1. GRP

        You think the cost of insurance will come from their profits? They will pass the cost on to the consumers and everyone will end up paying more for fuel/transportation and everything that depends on transportation i.e, everything. In other words, it is the same as government paying for that insurance.

  15. G. Pitts

    “Sustainability” is a highly misunderstood term. Perhaps Montana would be in collapse were it not for trade with the rest of the US, but dense cities with good public transportation would starve if not for trade with other parts of the US.

  16. Podargus

    It would be a better idea to leave the whole rotten FIRE sector out of the equation.
    Establish the areas at risk and start the painful process of moving people and infrastructure out of harms way. Of course this directly challenges the psychology of prior investment.
    This solution will require government mandate and will no doubt raise screams of agony from all the usual culprits, encouraged and assisted by the aforesaid FIRE sector.

  17. Chris Maukonen

    I would say no. The insurance should not be subsidized. However the home owners should be able to get compensation from the land developers.

    Here is a little story. A small subdivision was put in in central Florida near the towns of DeBary and Deltona during an unusually dry period near one of the many lakes there. On land that under normal conditions would have not been developed since it was swamp and under water. The climate returned to it’s normal wet conditions and nearly all the homes were flooded as they were then in the natural are of one of the lakes.

    The city and county because the approved the development in the first place, wound up buying the homes from those people there and the occupants have to relocate.

    A flood assessment should have been done by the city, county and developer before hand and based on long term assessment of flooding, denied any development in that area.

    If the developer had known that he would be liable, the homes would not have been built in the first place.

  18. Bernard

    living in New Orleans is a old way of life. my family moved here(New Orleans) in the 1700’s before the current “dangers” were apparent. now why they stayed here is another question, due to the heat, rednecks(non New Orleanian mentality), crooks(politicians), flooding from rainstorms, humidity and various other reasons. that my family ancestors lived here so long just proves we are and were part of the old way of thinking, That Christianist, subdue the world idiocy, that led most of the white people to “tame and conquer” the “wild” evil world.

    i have survived Katrina, Betsy and Camille. i didn’t ask to be born here and i can’t imagine living anywhere in this country other than West Coast, which i , as a working man, can’t afford. my house insurance is now too expensive to pay for, and i have a job, thank God or Beezlebub. do i give up my investment/my house, where do i go?. the Bottom line. my house, which i paid for with my working for over 30 years, costs more to rebuild/replace now, and insurers call the tune to how much the bill is. Perfect sitting ducks for the Insurance Industry. so, it was stupid of me to stay in the land of my ancestors,? and this wonderful city of New Orleans. i am very much a New Orleanian, yet leaving is difficult for a bunch of reasons, culture and food being obvious ones, besides the long family history here. and of course being a working man, i can’t afford to retire.

    now i have to choose between house insurance and having money for other bills. what comes first? and how can i not pay other bills(?) that have to be paid. where’s that “extra” money coming from? QE for people like me? just to afford to insure my house. with the denialism of the Elites, the chances of another Katrina increasing as the temperature of the Gulf of BP/Mexico increases, i sit here waiting to see how long something doesn’t happen to my life’s investment, aka the American Dream,lol, my house.

    i don’t expect the rest of the US to subsidize my ancestors’ way, nor do i want to subsidize the people who live in fire prone areas of Colorado, or other areas of the West due to the increasing numbers of wildfires they now have, or Tornado Alley in the Midwest US. these people are living in very obvious danger zones, lol. What and who makes these choices? the Insurance Cos.? it is a conundrum and unless people are subsidized to live/move, what other options are there? we are all going to have to pay for everyone else’s decisions of living in “dangerous” areas.

    i guess what will happen though, is the Government will ignore us down here in the Gulf Coast, just like they did in the BP spill, and pretend we don’t exist.
    and yes, there are many bad things about living here. Rednecks/Neoliberals/Republicans/Blue/Democrats mostly. i wish i could afford to move. i wish there were jobs across America in this neoliberal age where those who live in danger zones could move to/from. there aren’t and the reality means we who live in places like New Orleans, are on our own. we will lose our houses/homes due to the fact we are nobodies in the Neoliberal economy. ants who tread water when it rises. and go back to rebuild afterwards.

    watching the Elites play games with things like Insurance policies/costs for living here, just shows how quickly we are going to get screwed. just because we don’t have the money to lobby/buy Congress to save our little part of the world. if i could retire, then i would, and hopefully that day will come, but not soon enough considering the future of the Gulf Coast. or maybe losing insurance to live here means i will have to retire. once i lose my house, where can i live to keep my job? give up my job and become a pauper without a house and without an income to live off of.

    ah. the Neoliberal Dream realized!! Heck of a job, Brownie!

    what a tangled web.

  19. Former Floodplain Manager

    Today, I am working with communities where FEMA is preparing new maps. Properties that were not even in the floodplain 30 years ago are now mapped as being in, some because of the result of the development the eariler FEMA study did not reflect and some because of changes in the technical analysis used to generate flood elevations and map them. The howling across the country is not just because of the rates ballooning, but also because the FEMA maps are making the floodplains and hazard areas bigger and deeper adding tens or hundreds of thousands of existing homes to the ranks of property subject to insurance and regulation.

    Federal, state and community officials history has been to promote development, invoke FEMA’s maps as the acceptable minimum standard (therefore the maximum in practice), and not concern themselves with anything further. The newest round of maps and rates is not changing this. Unfortunately, for the millions of people with homes and businesses constructed in flood hazard areas since the adoption of the NFIP they are a captive market. When rates were cheap they didn’t care, now with rates going up they have no where else to go.

  20. Steve

    I’ve read this thread and comments with great interest as I live at the “Jersey” shore and have for all of my 60 years.

    #1 The maximum amount of Flood insurance that can be purchased thru the Federal flood program is $250,000… With building cost these days of about $125/sq ft… That means you can fully protect a home of approx 2000 sq ft… Not quite a mansion…… As stated above by JT Faraday Flood insurance is MANDITORY for any person with a mortgage who is in a designated flood zone… Not just the coast, rivers, lakes, valleys anywhere the FEMA maps deem a flood risk… Charging 10-20% per year of the insured value seems a little extreme… Any person with the means and no mortgage will simply self insure..
    Leaving out the average joe… Only the rich will inhabit the shore

    2# I live on a river within a mile of the Atlantic, I own a boat which was moored less than a mile from the ocean… Both very near Mantaloking NJ where the Atlantic breached the barrier island…. No insurance claims were made on either the house or the boat as a result of Hurricane Sandy….. One can live prudently near the coast….

    3# In 2004 I sold a house which I had built in 1996. This house was directly on the northwest shore of Barnegat Bay within 1/4 mile of the Mantaloking Breach. That area was severely flooded and sustained a great amount of damage.. The house, which was built according to the building codes in effect in 1996 sustained no damage… While the house next door had 18 inches of water on the first floor….

    4# Many of the houses in the area were originally built as small vacation homes by mostly middle class folk during the50’s, 60’s,70s and 80’s…. On 50×100 lots…. Families would summer at the shore… Husbands would commute to North Jersey or NYC… and return on the weekends… It was those houses that were devastated by the floods of Sandy…
    Even in towns like Mantaloking and Bay Head it was mostly the older structures that were
    wiped away….

    5# If we eliminate flood insurance, will we also eliminate disaster aid and rebuilding help
    to the victims of Midwest Tornados?… West Coast earthquakes…?

    6# Flood insurance premiums should be adjusted to a reasonable level … 2% of insured value is a normal premium… Newer building codes can be adjusted to mitigate loss…

    7# I’ll never live far from open water…. It is my way of life… Just as farming is to some and city life to others….

    Sincerely
    Steve

  21. Hugh

    Climate change exacerbates the problems of poor zoning and over development. I guess what you could say all three have in common is a willful ignorance and lack of foresight born of corruption and greed. We aren’t acting to contain and reverse global climate disruption. So it isn’t much of a surprise that we aren’t doing anything constructive about developers siting housing in marshes and flood plains, or literally building houses on sand.

    What higher insurance premiums will do is, with succeeding disasters, weed out the poor and middle class from choice areas leaving them to the wealthy who can afford to build and rebuild as needed.

  22. dw

    do we understand that not all flood plains are on the coast? some of the biggest are around rivers? inland many 1000s of miles from the ocean. and these rivers tend to flood a lot more often than we have hurricanes?

  23. alex morfesis

    yup, it would be great if the bernays sauce were not so thick on this issue

    homes have been built in parts of the country that never had homes, causing damage that would never have existed if either the construction requirements were stronger…meaning using concrete with rebar instead of particle board for roofs…or they were never built at all…

    but the worse part is the hurricanes in the US at least are being caused by a far off issue…

    the sauds have been burning gas and not capturing it, heating up the trade winds that come off the indian sea and then the expansion of the sahara desert further heats up the winds, and the edge of the winds get spun around at the edge of the lush portion of africa which then pops out into the atlantic at a heat range that is not the natural historical rate.

    but I have to give a shout out to the folks in california for their capacity to get things done

    after the earthquakes a little while back were they not required to carry earthquake insurance ?

    and what happened…poof…not a problem anymore…this is a problem since lenders not only insist on having the flood insurance in place (sherman act anyone ?) but they refuse to allow a large deductible to be put in place…insuring that large policy rates are in place…its the same with other insurance requirements…

    sorry, but i, although not some karl rove nazi films in the basement of the whitehouse type denier…am not a big fan of accepting the notions of climate scientists who when i was but a young lad and before they got grey in their beards and hairplugs, used to insist on working to scare me at night as “soon…real soon…we are going to have a new ice age”…booooo

    besides, i am old enough to have had to use the old metal ice trays and recall that when you filled up the tray to the top, when you got the ice it was bulging out of the perimeter of the tray and when you forgot the tray and left it on the counter because some not so emergency emergency arrived, that when you got back the ice took up less space as water again…which brings me to the issue of melting ice caps…ice takes up less space as it melts…substantially less space…

    and those who would try to scare us into buying something or doing something…well…they rely on the fact most people when they see a map of the globe and see this BIG BIG BIG land mass we call antartica…that OMG if all that melted…except its not as big as it seems and neither is greenland…

    so for those of you looking for a reason to be afraid scratch this one off your list…do the math…ice land and antartica have about 1000 feet of actual ice…most people who do some quick and dirty math forget that antartica and greenland are a wee bit high up there, sorta like Tibet…so its not 7000 feet of ice that is going to melt as 6000 feet of it is land mass covered by the ice sheet…and as most folks who have ever been in the rain might remember…when it rains, it doesn’t bounce off the dirt…it mostly gets absorbed by the dirt…so…lets see…if you had 6000 feet of land mass and tried to get it to absorb 1000 feet of water…

    nah…that could never happen…the water would magically slide off the soil and…

    sorry to do the math and burst a few bubbles…

    but maybe History 2 will bring us an interview with some well respected Alien philosopher Blaglunklyp from the planet Boingo who will help answer the question we have all been waiting to find out…is there really any intelligent life on the third planet from the sun…

    putting a million years of natural carbon output back into the atmosphere in 100 years is not a good thing…but even if there was to be this “issue”…we have a few spots on the planet we call “deserts” which since they are for the most part devoid of life, might be able to hold a little bit of water if need be…ecologically incorrect, but if we are talking global solution…there aint that many people living in deserts globally…considering the costs it would take to pump water in a disaster scenario…the cost of buying them a condo in a new trump development would be a small cost to factor into the equation…

    1. OIFVet

      Care to post citations to back up your claims? Also, feel free to discuss the effects of the resultant lower salinity of ocean water on sea life and ocean currents which, as an expert you no doubt know, regulate the planet’s climate.

      1. alex morfesis

        you want me to cite what exactly…??

        that antartica and greenland are plateaus ??

        that burning natural gas in oil fields in saudi arabia raises the temperature of air ?

        that hurricanes are the effect of the change in the season and winds cutting across the
        sahara ??

        or that rain gets absorbed by soil ?

        the idea that we were once heading into an ice age (as seen on TV) ?

        or that karl rove watched nazi propaganda films in the nixon white house basement ?

        or that building waterfront homes to the same specifications as earthquake zones would cut down on damage ?

        or that i classified Blaglunklyp from the Planet Boingo as an Alien Philosopher ?

        or that I actually know there is an H2 network ?

        or that ice when it melts takes up less space in volume ?

        or that not too many members of the human race live in deserts ?

        as to insurance issues after the 1994 earthquake
        maybe i might stand somewhat corrected but…

        http://leginfo.ca.gov/pub/95-96/bill/sen/sb_1301-1350/sb_1326_cfa_950327_144820_sen_comm.html

        I would much rather discuss the little itsy bitsy pieces of plastic floating around the ocean…

        science, as ike tried to warn us, is a racket.

        wondrously long and invented permutations of greco-roman lexicology designed to send one running for a dictionary…

        (people do still use those, don’t they ?)

        so that the simple is confused and attempts at understanding are aborted…

        so tell me…

        1. different clue

          Ice does indeed shrink a little as it melts back to water. So if the entire Arctic Ocean sea-ice melts, it will not raise the ocean by the volume of its meltwater because it is already floating in the ocean and already displacing the space it would occupy when it melts.
          But but BUT . . . the ice caps on Antarctica and Greenland and Baffin Island and Elsmere Island and etc. are perched aBOVE sea level on continents. So if they melt and flow into the sea, they will add their entire meltwater volume as new water. I doubt there is any soil to speak of under the various ice caps. If you have research showing otherwise, that would be helpful.
          Is there any evidence citeable that Saudi Arabian burn-off gas plumes carry their discrete unequilibrated heat all the way over to Africa? That would be helpful too.
          I have read that the Greenland and Antarctic ice caps average a mile thick, all of it above sea level. Are there linkable resources showing that to be wrong?

          I too remember “the coming Ice Age”. Somebody overdramatized it at the time. I think the climatologists were talking about a “frosty chill age” rather than the Return of the Ice. Maybe I remember wrong. Here is an interview with one of those climatologists.
          http://www.motherearthnews.com/nature-and-environment/reid-bryson-zmaz76mazraw.aspx#axzz2pJJ5khoK
          Also, I remember reading many years ago an article about research done on pollen layers in bogs, which build up like annual tree rings. Researchers looked at the cyclical coming and going of different kinds of pollen and supposed the plants which shed them had the same climate requirements as those same plants have today, which seems fair. They found some repeating cycles of warmer/cooler/warmer/cooler pollen layers showing up. They said: if those very same cycles continue the same way into the future, we are due for a chilldown in a few decades. It clearly hasn’t happened.
          Global warming dismissers like to point to the “coming Ice Age” of the 70’s to mock climatologists. If they were so wrong then, how can they be any righter now? But I think something different happened. These prophets of “Ice Age” were not accounting for global warming. They probably had not heard of it. So what happened to their predicted chilly frost age? It was overtaken by events. Global warming has prevented the chilly frost age from taking place.

  24. OIFVet

    Cite research which supports your contention that the Greenland ice sheet is 1,000 feet thick, based on either ice cores, radar, sound mapping, whatever. Make sure it is not based on your say so, but on peer-reviewed scientific studies. Also, enlighten us regarding the Antarctic ice sheet, again based on scientific studies. Discuss the combined volume of the water which would be released into the oceans if those two sheets were to melt. Discuss the effects of said melt on ocean water level, again based sound scientific and mathematical calculations. Also be sure to include discussion on effect of ice melt on water salinity and the effects of salinity change on sea life, making sure to cite your sources. You might also want to discuss economic consequences of such effects on the world’s fisheries. Discuss the role of salinity and water temperatures on ocean currents, and how said currents regulate climate on local, regional, and global scale. Include models on the effect of ice melt on ocean currents, and how such effects may affect climate on local, regional, and global scale. You know, pretty simple stuff for a well informed fella such as yourself. Come on troll, give us your A-game.

    1. alex morfesis

      nice legend…quite convincing

      anyway…

      don’t confuse my mensa membership with intelligence

      peer reviewed scientific studies…

      how much bernays sauce would you like on that study ?

      the death ray from the mother ship from the planet boingo might
      be capable of melting that ice in one quick “woosh” of H2 proportions

      but in the real world, if the ice cap does melt, it will probably do it
      quite slowly over a hundred years…and remember…although
      ancient aliens may be able to tell us from their own version of the Hubble
      the historical patterns of the ice sheets, we slightly pathetic humans have
      been able to observe from actual satellite
      data the facts of our existence for thousands of years…isn’t that right…my little legend…
      we have been able to observe all these changes over all these thousands of years…

      hmm…the math seems a little wrong there…its all of what…

      40 years maybe…

      now if maybe the peers are led by Jordan Belfort and Bernie Madoffs
      brother (you know, the guy who ran around at the nasd for all those years), with the magic
      of Mr 5 percent thrown in for good luck, we might be able to make that cardboard taste
      dandy with enough bernays sauce thrown on there…

      yup…wont be able to run away from that rising sea fast enough

      lets see…taking what would be the worst case proposition
      at about 200 feet over 100 years…hmm…lets see…that would be
      2 feet per year…hmm…if i stood on the beach and waited for 3 weeks
      the water lever might get half way up my ankle…couldn’t outrun
      that…

      so we move…even in your highly chimeric H2 channel space aliens
      end of the world scenario…life happens…change happens…ask the
      mayans…

      do your own math, draw your own conclusions

      trollee out…

      “the ice’s response to warming is inherently complex and because there is little data to go on. Temperature records exist for only a few locations along the perimeter of the continent, and even those go back only 50 or 60 years.”
      http://phys.org/news/2013-09-antarctic-ice-sheet.html

      http://www.antarcticglaciers.org/antarctica/east-antarctic-ice-sheet/

      “The shelf’s mean ice thickness is about 1,100 feet (330 m) along a line at about 79° S latitude.”
      http://www.britannica.com/EBchecked/topic/510126/Ross-Ice-Shelf

      1. OIFVet

        Unsatisfactory effort trollee, surely the Koch’s are expecting more for their money. Leaving aside the ludicrous assumption of a linear melt progression which defies the positive feedback loop mechanisms, your attempt at cherry picking numbers won’t fool anyone with at least one working neuron. Don’t worry though, I am not about to confuse you for an intelligent life form. You have worked very hard to make sure of it.

      2. different clue

        About your last link, the Ross Ice Shelf is indeed a shelf of ice extruded from the Antarctic Ice Cap upstream from it. It is not the Ice Cap itself. What is the thickness of the Ice Cap itself which is perched on land? I thought you were a sincere skeptic but I see you are merely dishonest. Did you think you would would get away with the diversionary deception of bait-and-switch substituting a coastal ice SHELF for a continental ice CAP? You must not be very intelligent if you thought you could get away with that. Clearly a MENSA membership is no guarantee of intelligence or knowledge or wisdom. I also note you carefully dodged my questions about the average depth of Greenland/Antarctic/other land based icecaps and links to same.
        I also note that you carefully ignored my question about how some burned flair gas in Arabia could carry its unequilibrated heat all the way to tropical West Africa.

  25. different clue

    About suburbia, most of that which is already built is not going to be abandoned. As it gets harder to live there its value will go down and millions of poor people will be driven out of the cities into the new suburban slums as millions of middle-and-above people abandon slumifying suburbia and move to the compact cities. Something like in Paris and maybe elsewhere in France.
    So since suburbia is not going anywhere, can something useful be done with it? David Holmgren, Bill Mollison’s co-founder of Permaculture, thinks suburbia can be retrofitted and repurposed for hi-intensity permaculture.
    http://www.urbanpermacultureguild.org/images/Holmgren-Suburbs-Retrofit-Update.pdf

    1. Yves Smith Post author

      Detroit, Cleveland, and Youngstown suggest other scenarios are possible. Entire neighborhoods are being abandoned and in Ohio, plowed over for cornfields.

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