> In some coastal U.S. cities, it’s not just the hurricanes and floods putting homes at risk, it’s the cost of insurance itself that’s becoming unsustainable
It is the disasters that are causing the insurance to become unaffordable.
You can go read the financial reports for these insurance companies. They are losing money hand over fist in disaster prone areas. The industry as a whole typically loses money on underwriting home insurance, at best they have a year or two in a decade where they make a point or two in profit.
Fundamentally the goal of an insurance company is to pool risk and distribute it so that catastrophic events can be covered. These areas have too much risk (and certainty in the occurrence of catastrophic events) for the pooling to be viable.
Home owners in low-risk regions like upstate NY actually have to subsidize the solvency of insurers offering coverage in extreme-risk regions like Florida and the south.
Everyone's home insurance premiums should be lower than they actually are. Except they're not, because we have to pay to offset the cost of all the people rebuilding their houses on the Florida coast every few years.
I mean that's kind of a strong claim. Premiums are priced by risk. If insurees of one company in Florida are getting more than they pay in aggregate, then other insurance companies which correctly price the risk in NY will take all their customers.
This only holds for government insurance programs. And in that case all taxpayers are subsidizing them.
I cant say I understand this, to me it seems like if you know the averages of claims across time will be $X, then you just sell the premium for >$X . Like it could be seemingly absurd, like if you expect to replace a house every 10 years, then you do annual premium >= ($REPLACEMENT/10) . (all averaged across the pool)
The pools can be different based on the US state and the type of insurance based on the location where the insurer is doing business. For a region where a major dangerous weather event is a certainty on a yearly basis, I (a layman in insurance) would expect the premium would approach just the full cost of replacing the property rather than being something you barely think about once a year. Hence the pricing out.
Well there’s overhead like cost of administering the claims etc etc so actually if it were literally replacing the house every 20 years the annual premium would be like house$ / 10 not 20.
But if it gets even remotely close to that point the yearly insurance is a significant portions of the house worth and it’s obviously not affordable/insurable - whatever term one wants to use.
At that point if one can’t self insure then they can’t afford the house
Disaster prone areas are uninsurable due to climate change costs. This is market signal to not live or build there. Some will be sad, sadness is unavoidable.
A confounding factor is that construction and materials have gotten much more expensive. You aren't insured for what your house cost to build 20 years ago, you are insured for what it would cost to rebuild it after a disaster.|
The price of construction lumber quadrupled during COVID (it has since receded some), so all of a sudden the cost to frame a house went up by a significant margin, which means that the cost to insure against the future possibility of framing a house goes up too.
My previous job was at an insurance company in part of the country that is not disaster prone. Even then, once in a decade hailstorms would essentially wipe out reserves and necessitate reinsurance. It would take probably 5 years to recover from the effects. You always had your fingers crossed during hail season that you'd finish the year in a position to get some bonuses. And this was a mutual insurance company, so no quarterly shareholder pressure, just long-term sustainability goals. That company would never dare expand into Florida.
Not to mention, taxpayers across the country are subsidizing federal insurance programs for people to rebuild those homes in the exact same location.
I get ties to communities. I get "socialism" - I'm all for universal healthcare.
But maybe there are limits, you get one issue. If you live in a flood zone, your house gets rebuilt, and it floods again, maybe the requirement of that insurance is relocation.
As it stands, there are people who have had their home rebuilt three times in 20 years in the same location through insurance and FEMA. I'm not saying that from the perspective of "that must be nice" - losing valuables, all the issues with flooding, are entirely horrible and unpleasant. But at what point do we as a society say "Y'know, maybe just don't build there... again."
As Bill Engvall said "here's your sign." It's expensive to live in disaster-prone areas. Whether the disasters are due to hurricanes, tornadoes, wildfires, or earthquakes. You are statistically more likely to make a claim, and therefore your premium must reflect that reality.
The rising premiums serve as a brake for continued development in such areas. Not only should it drive the build-out of fewer units, it should also drive the build-out of cheaper units. Building multimillion-dollar homes in disaster-prone areas should be extremely expensive to insure.
Intentionally. People refuse to accept that storms are becoming more powerful while bringing much more rain. Shifting the blame to evil insurance companies is much more palatable than accepting that the climate is changing
Maybe its insensitive to say this, but isn't this a REALLY good thing and will save tens of thousands of lives?
How else do you convince people not to build and live in spots that are known to be disaster areas, in a country that has so much space that you can drive somewhere and run out of fuel?
I would go slightly further and say that a lot of this is subsidized by things like FEMA and NFIP and as such, there should be a three strikes rule. If a property makes a claim based on a disaster like this, they shouldn't be able to just rebuild there indefinitely, regardless of the cost. After the third claim, that property should be rezoned and made unavailable for development. Make it a park or at worst an open parking lot with no infrastructure.
I would argue it should happen after the first disaster. The government has subsidized houses being built in known flood paths for too long imo. If you are in a known zone and had a major loss. You don’t get money to rebuild but instead money to build elsewhere.
They have been doing a version of this for a while in some areas. The homeowner gets a bailout, but the money comes with rebuild requirements (often lifting/lofting the building above a 100 year flood level). If they are met, your property remains insurable and eligible for future help. Conversely, the owner can take the money and keep or sell the land.
The problem with this method is that it tends to gentrify the region. Wealthier people can afford to live elsewhere during the repairs, but people living paycheck to paycheck are often forced to take the money and sell the land.
What is a "three strikes" for if the cost of periodic rebuilding is financed by unsubsidized insurance?
"Rezoning" is a needless control that then prevents future development that might be impervious to whatever disasters caused the periodic rebuilding before.
The problem is that due to the nature of democracy, people expect to be bailed out if there is a huge disaster. If you don’t want to pay another claim, you need to make demolishing the house and rezoning the land a condition of paying the final claim.
Today - there are thousands of families who have to decide whether to live in an uninsured home in a disaster prone area or spend a bunch of money/uproot their lives/move elsewhere/find a new job etc. I'm going to guess most will stick with option 1, because they cannot afford the alternative.
Those families are suffering the effects of their choices. It could be that they rationally prefer the risk of devastation or the higher insurance rate, than living somewhere else. We should allow them the freedom to choose, without also subsidizing the choice.
Yeah its definitely a good thing ON THE WHOLE. It's legitimately bad for the people it affects and the sort of vindication people feel for seeing them suffer is sick.
One common reaction to this is state subsidies or regulation to make it more affordable (see this in California and Florida). While this is bad, spending money on the problem is good. People often conflate "dont subsidize" with "dont spend money." Instead they should spend it to offset the damage/inconvenience done to the people affected. Moving assistance or something. Not subsidize living in dangerous areas.
It's kind of the Warren Buffet approach to people whose livelihoods are ruined by a changing economy. It's real harm and its not fair, but you dont stop progress. You also dont say "fuck em" - you support the people who get left behind.
Any assistance on moving out is a very bad idea. There are rising insurance costs, slowly, people have time to respond.
People in Florida did not even advocate for mitigations that would have prevented the rising costs, when they were given decades of warning.
Protecting home values above all else is very bad for society. Unless renters are given the same protection and massive handouts, it's a very unfair system
Yes, you support the people left behind with the profits of the people who are ahead.
The US voters just hate that type of equality. And as a result the vindication is merited - that is an inherent feature of non-merit based inequal societies, just the the US is.
Having insurance doesn't save lives. The people in those homes are able to leave during the storm so they are not in danger while the insurance is left footing the bill to repair the damage. So I'm not sure where you will get tens of thousands of lives saved.
If they don't have insurance, hopefully they will leave and less new people will build houses on uninsurable land. At least some of those people will then avoid injury and death in the storms?
I read it as less insurance coverage, less people buying and building. There is always some % of folks that stick around. Over the medium and long term that probably equates to some number of lives.
People who want to pay for the cost of replacing their homes in Florida will pay for it, and they still get to make the choice to pay instead of being forced out of the place they would prefer to live.
Correct me if I am wrong but is not most of the damage near the ocean where you get massive surf flooding? Typically a few miles inland is ok no? That’s at least what I have read in the past. Might be wrong!
I don't disagree with you on new builds and new purchases. But homeowners living in some of these areas for 10...30 years suddenly becoming un-insurable when the environment changed around them is a thorny issue.
How is that a thorny issue? What got us into this housing crisis is exactly the mindset you're displaying here: once you get yours, it's yours for the rest of time and anyone who tries to change that should be voted out.
Why do these home owners deserve more support? because what? They own some property? (Or at least the bank does)
I don’t feel sorry for these people. They made choice and the evidence this was inevitable was in front of them for 10 years at least. They don’t deserve special consideration.
Considering how we treat things like job loss, which is a good allegory here as it has all the same features of circumstance, why do they deserve special considerations that aren’t extended to other groups?
What makes you think they won't be bailed out by creating a national subsidized insurance program? The national flood insurance program only exists because insurance companies didn't consider insuring properties that are destroyed by flood all the time a good idea and stopped doing it altogether.
Maybe that's a thing the first few times this happens. But it won't be happening just once or twice.
Using public funding to keep on bailing people out is going to get expensive for everyone and won't be that popular the more often it happens. Expensive bailouts make them a natural cutting target.
The way this works out financially is that insurance prices go first. Then banks do the obvious thing which is to be reluctant to provide mortgages on property likely to suffer damage within the mortgage period. That probably is already a thing. That in turn makes existing property a harder sell and affects property prices negatively. And as a result, some property mortgages might be under water before the property is under water. A natural disaster would wipe out the uninsured property and then the mortgage. Any banks with lots of exposure to that might be facing issues if that happens.
Any public funding used mitigate that is more likely to go to these banks than the people affected. Which won't be popular.
Easy to spell this out, because minus the root cause (natural disasters), this is more or less what happened around 2009 when banks had to be bailed out because of the subprime loans. Loads of foreclosures and misery. But it was the banks that got the bailout.
The predictable end result is that after a few disasters, certain areas just won't be rebuilt again because nobody is willing to fund that. Some people might move out before the worst happens. Banks and insurers will be the first to move out. Probably sooner rather than later. That probably won't be great for people that remain since investments in public infrastructure and maintenance of things like roads will also drop off for the same reason.
It’s good for preventing new homes on those areas. Less good if you already own a home, and its value is now falling inline with the increasing premiums.
tell me you don't live in the US without telling me you don't live in the US. Everywhere is a disaster "zone", whether it's hurricanes, floods, tornados, dust storms, landslides - They'll find an excuse.
This comment about how we shouldn't be living in disaster zones is completely out of touch with A) Where people live. and B) What a disaster zone is.
Coastal cities (where 59% of people live) will say it's prone to hurricanes and tsunami's, flooding and storms. 50% increase.
Inland cities, floods and landslides - 50% increase.
Desert Towns, dust storms and tornados - 50% increase.
Mountain Towns, floods and landslides - 50% increase.
Nomadic villages of hippies and communes, tornados and floods - 50% increase.
I know not of a single home owner who's premiums didn't go up, no matter where they live.
My rural home insurance in the Midwest where the only risk is tornados has certainly gone up.
When I saw the headline "disaster-prone cities," I thought maybe they were talking about crime or terrorism or something. For something like a hurricane, everyone in the danger area would see insurance rates go up, not just those in the cities. Odd way to word it.
That’s a huge misconception of how insurance works.
And those disasters are geographically off. Hurricanes are not a coastal thing for the whole nation, west coast does not get them. Tornadoes are not a desert thing. All those sound like being pulled out of a hat without actual knowledge.
Tell that to the insurance companies that upped my premium for hurricane disasters even though I don’t live near the coast.
I’m at least 500 miles inland. It no longer matters about geography and it matters whether there was ever one in the past. The last few hurricanes went deep into Midwest land so naturally, we are now in hurricane zones.
came here to say this. We really don't want to subsidize people living next to active volcanoes. If you agree with that, then you can extend the analogy to all other forms of predictable natural disasters.
FWIW, we actually do subsidize people living next to active volcanoes. If for no other reason than Hawaii is strategically significant (I think there are good humanitarian reasons also, but I'm pretty sure the US federal government would continue to see it as strategically valuable to help people in Hawaii recover from the occasional eruption regardless). https://recovery.hawaiicounty.gov/resources/recovery-grants/...
This is a fraught space. Without going into deep detail, the people of Hawaii care little what mainlanders think is "humanitarian" about where they have historically lived for at least 1,500 years. And to be fair to them, it's hard to make solid assertions that a living situation is bad when it has existed for 1,500 years.
it's a good thing until it's your house. when we bought 5 years ago there had been exactly one tornado within a hundred miles of us in the entirety of the historical record. Now there's been one each of the last three years and I'm sitting in what was supposed to be the central investment of my lifetime wondering if its asset value is gonna plummet to zero while the cost for me to actually stay here is gonna become entirely unmaintainable, leaving me with no way to hold this position and no exit aside from maybe bankruptcy. Dispassionate analysis of systems is important but remembering that this system is made of actual human beings and involves what for many of them is their life's work is also important. I did everything right, went to school, got the job, built the nest egg, invested in the community (the historically non-disaster-prone community), now it could potentially all disappear out from underneath me and there's nothing I can do to prevent it.
I really do sympathize, but we are apparently all deciding not to do anything that might help with the climate so these shifts in weather patterns are unavoidable.
I hope you can get out of there before the house is unsellable, or at least get the material cost back.
You could still have people living there, but the problem is that they don't build for the kind of inclement weather they are threatened by. The building code should require all construction to meet certain levels of survivability. You never see concrete houses blowing down anywhere, but in Florida, they like to build on the coast using matchsticks....
Yes, it absolutely is. East Grand Forks, MN demolished all buildings in the floodplain after the 1997 floods. I understand Florida is bigger than East Grand Forks, but not every single person living in Florida will be priced out of home insurance at the same time, hopefully there’s enough wealthy people who can afford to self-insure to buy up all of the existing homes, but it’s unlikely and someone will have to lose money.
> East Grand Forks, along with Grand Forks, was heavily damaged by a major flood in 1997. The entire city was under a mandatory evacuation and almost no homes were spared damage. After the flood, several neighborhoods had to be demolished because of damage. The city cleared development from the floodplain bordering the Red and Red Lake rivers. It developed a large park known as the Greater Grand Forks Greenway to provide a new recreation area for residents along the river. A similar park was developed in Grand Forks. The parklands, with trees and a variety of greenery, can absorb floodwaters and help protect the cities naturally. Moving residential and business development out of these areas also helps prevent future flood damage. In addition, a new system of dikes was constructed to protect the city from future flooding. The city has since rebuilt.
Im counting all the lives lost by natural disasters, by the resulting depressions, financial issues, etc.
Its not as simple as "N people died from literally being inside the storm, therefore the number of potentially saved lives is N". There is always a domino effect from a massive disaster, even if "just" a couple of people die directly at the hand of the disaster.
The next largest category of natural disaster fatalities after tropical storms in the US is heat waves. The insurance companies aren't stopping writing polices in places that have heat waves, that's most of the country.
Next after heat waves is severe storms. Same thing. Then winter storms. Same thing.
Insurance companies are avoiding a couple particular types of natural disaster that have the capacity for massive property damage at a single point in time in a concentrated area, mainly tropical storms and wildfires. Those natural disasters just don't cause many deaths in the US.
Tens of millions of people live in those areas. If you're going to talk about "the resulting depressions, financial issues, etc." you might want to give some consideration to tens of millions of people being forced to move, to risk going uninsured, or losing their homes.
I'll limit the scope of my reply to hurricane zones as wildfires and flooding are a bit different.
People in hurricane zones are used to evacuating and have plenty of advanced notice. For the vast majority of the time they're able to enjoy a healthy beach lifestyle - relaxing, great climate, fun hobbies. It's extremely rewarding to live near the beach. I'm sure there are studies that show positive impact to health and healthspan outcomes as well.
The problem is that America was for several generations living in a privileged bubble. The post-WWII period was very good for us. We could afford to build, rebuild, and rebuild again. Labor costs and material costs were low, and there wasn't overwhelming demand. This advantage lasted for a whopping 50 years as we transitioned from strength to strength, shifting from a manufacturing economy to a robust consumption and services economy.
Until recently, it didn't cost a million dollars to put a home near the beach. What's changed is the economic position of the country and the financial capability of the average American. We can't build houses for $60,000 anymore.
This is less a signal of "insurance getting smarter" and more of a signal the outsized advantages of America are coming (have already come) to an end.
If you want to constantly rebuild your house, be my guest, but you're going to have to pay a lot for the nice climate and beach property in that case.
the post war economy was an aberration when the rest of the world was recovering from being bombed to hell, it was never going to last forever. excesses like cheap rebuilding are just not as good of an idea of building to last in safe areas.
Florida shorelines used to be full of little fishing shacks and beach cottages. If hurricane winds tore it down or it floated away in a storm surge it wasn't the end of the world to replace it because costs were reasonable.
It's a totally different story now that the average beachside "home" is a $10 million dollar mansion.
Katrina runs counter to your point. Even Miami itself does without Katrina level disasters
Skipping past all of the other negatives about living in a known disaster prone area, we couldn’t afford to rebuild even back then without endless deficit spending. As I speak, New Orleans is still in the process of rebuilding post-Katrina decades later.
> This is less a signal of "insurance getting smarter" and more of a signal that American excess is coming to an end.
Well in the end it evens out in making more people homeless.
Here are your choices: a 800k house that require you to work 18 taco bell/gas station/home depot shifts per day OR out in the boonies where if you want insurance you need to work 5 shifts per day. Both are impossible, so you just work 3 shifts and don't have insurance and use food stamps to eat.
There stories are not well distributed but people that get priced out of cities end up buying a singlewide/double wide or just rent and then the house gets destroyed and they have no insurance and end up entirely on the streets.
So yes it is definitely insensitive to say that. Perhaps you would understand if your cushy tech job was 25k per year instead of 225k.
How does it make more people homeless? Insurance absolutely is a good proxy for real risk and there are plenty of places to be building homes. If you live in a flood zone you can still get the government to help cover some of the risk but also… flood zones are not new. I don’t really want to incentive people to continue to buy and build in these areas. Use the dollars to rebuild elsewhere.
Insurance was not supposed to work this way first of all.
You're a woman so we're going to charge you double for health insurance because you know, your boobs might get lumps.
I do agree with people that "rebuild and rebuild and rebuild" in the same area without the codes catching up.. I think if someone is wealthy enough they can afford james hardie siding ALL the way up - for example in a fire zone.
I think the insurance should be the same cost but the payout should be capped based on the decisions that are made.
> Insurance was not supposed to work this way first of all.
Insurance is a mechanism to transfer risk, this is exactly how it works. Actuaries calculate risk, and then the insurance company sells a policy they think they can make money on based on the calculated risk.
US health insurance isn’t insurance, it’s just called insurance for whatever reason.
How is this the fault of insurance companies? Building more houses would fix this issue, not pushing the narrative that people are entitled to a plot of land for eternity.
The tinfoil hat part of my brain suspects that jacking insurance rates up is a good way to get people to vacate land so it can be owned by the very wealthy only. Declare the land "too dangerous" to live on, homeowners get priced out because they cant afford the insurance plus mortgage, somebody buys all the land up and magically it gets reclassified as safe. A sort of insurance-based blockbusting. This time though it's nationwide.
It could also incentive people to use constructive methods more adequate to the place where they want to build.
If you live in hurricane/tornado land, probably you'd better use bricks/concrete blocks in a sturdy steel or reinforced concrete frame with a deep foundation.
Unfortunately, unless we install some kind of back-stop to facilitate people moving without ruining themselves (since the median American has a little under half their net worth tied up in their home), this will be a messy transition. You can't sell those houses to afford to move elsewhere since the whole problem is they can't safely be houses anymore (as the sage said, "Sell them to who, Ben? F**ing Aquaman?").
We will all pay the tab to restructure society to avoid this climate change effect, or we won't and we can expect the people who get screwed to not be particularly invested in being part of this society.
It's less about sympathy and more about practicality. How well does the country fare if an entire state suffers unmitigated disaster?
... and if the country is willing to let its state suffer unmitigated disaster, what good is the country?
(Your wise choices mean you will likely come out on top regardless of how high your mountain is relative to the people who chose poorly. How concerned are you that your peak could be a little smaller because you live in a society with 340 million other people, half of whom are below average intelligence... And those people need help?)
While the article refers to Florida and Louisiana, due to increased precipitation density we're seeing more intense flooding happening more frequently in areas that aren't near the coast but are near a river. Many small towns in New England were established near a river for power and transportation. In some cases, they've now been flooded on the same day three years in a row.
These didn't used to be disaster-prone cities, but they are now.
Even if shelter is or should be fundamental human right. Shelter in specific location subsidized by others is absolutely not one. There is nothing sane stopping making areas with less risks denser. Thus overall saving costs for everyone.
Indeed. I, for one, would be in favor of turning hurricane zones into national parks, eminent-domaining those properties for 90% of cost, and federally (or state with federal funding) facilitating moving those families inland.
It won't be painless, but it'll be less painful than letting the market try to solve it and telling them "Good luck selling your stick-pile when everyone knows it's not safe to live here anymore!"
Inland from the coast of Florida is a swamp. Is that really any better? I know the orange man is a fan of draining swamps, but I'm pretty sure that's not what was meant. People don't live in deserts. People just need to accept that the opposite of no water can be just as in hospitable
Where will people move, without a huge amount of homes being built, where will they move to ?
If the move, even with their current insurance rate, their payments/rent will probably cost much more then they are paying now. Especially if their home is paid off.
Paying essentially a 3% tax on your home so you can keep living in a place with depreciating home values[1] is wild. In an ironic way it reflects the financial illiteracy culture (faux rich people who are deep in bad debt) of Miami.
Nailed it, mic drop >>> "reflects the financial illiteracy culture"
However for every Ying there is also a Yang so I too am interested in any factual data based replies or guidance please. And no, I am not looking to short REITs.
Some family members that owned in Florida for a decade sold a few years back after their costs began to balloon while other family members are still looking to move there in the coming years. Some can see what is unfolding, most cannot, yet all will pay given the systems current implementation.
I see many comments along the lines of, "Good, this is how the market should work" as if displacement is a desirable outcome. Reasoning from first principles, the world we want is one in which we have fewer disaster-prone areas, not more. This would mean lower insurance rates, and fewer instances of displacement. This is a symptom of a deeper problem.
Well, very fair, but we're not solving climate change or reducing the exposure to disasters. Sorry about that, I really would have liked it to happen too.
Maybe we shouldn't treat housing this way. A house gives you shelter and somewhere to sleep at night. I'm not advocating for a chaotic system that forces you to move every year but rather something that gives you options in the case that something does go sideways (i.e. a much bigger housing supply)
Isn’t homeowners insurance subsidised in the US in some places, especially in high risk areas?
I can‘t find good resources on this - is there a logic behind this beyond pleasing the people that have vested interests in those areas (like owning a home)?
Flood insurance specifically. Flood insurance in the US is often provided only by government entities because private insurers have all pulled out of that insurance market.
Problem is when the only provider of waterfront insurance is government taxpayers, that kinda looks like people who own waterfront property have convinced everyone else to subsidize their lifestyle.
> You don't have to believe in climate change, the Insurance company will believe in it for you
This is spot on. I once commented on a WSJ article reporting a similar story. The climate change deniers were in full force on that comment thread. They hated my pointing out that it doesn't matter whether they believed in climate change or not. They still have to pay the higher insurance.
Weather =/= climate. Hurricanes have been happening forever, and to imply the winds are 3 mph faster or something is silly, while implying the hurricane only exists due to your genre of politics is lying
What do you think is causing higher risk, then? If you have a non anthropogenic model I would be interested.
Either way the insurance is driven by data on the ground, and I think they're fairly trustworthy about keeping their own costs down. If they say it's uninsurable it probably is a risk.
You could read the article? It has to do with regulatory changes, rising fraud, and a string of hurricanes which drove prices up in FL and temporarily reduced competition. Since then rates now seem to be growing behind the rest of the nation as more small insurers enter the FL market and compete.
What is important to remember though is weather event =/= climate change. We expect a certain amount of randomness in hurricanes and natural disasters, and saying a year with more hurricanes is due to climate change is the same as saying a cold winter disproves global warming/climate change.
C'mon. You can do better than this tired denier line.
No one's saying hurricanes only exist because of someone's politics. The insurance beancounters are very much saying the winds are faster, more frequent, and do more damage than they used to.
And there's nothing silly about the billions of beans they're counting.
> No one's saying hurricanes only exist because of someone's politics
The comment I'm responding to says this, and you seem to be implying it as well. Insurance rates aren't going up because there are more hurricanes, they're going up due to regulatory changes, fraud claims, and rising costs/inflation. The article blames a 0.5 increase in insurance rates in FL due to fraud, and regulatory challenges in CA.
I'm sure climate change plays a role, but saying the hurricane being 1% stronger is to blame for high insurance costs is nonsensical and doesn't track logically.
> Experts say the spike is driven by climate change making disasters more frequent, the rising cost of construction materials, and a flood of lawsuits in coastal states that drive up payouts for insurers.
Sure, lawsuits/regulatory issues is a contributing factor. #3 behind #1: climate.
But even so, the "regulatory challenges in CA" are insurance companies saying "we don't want to insure wildfire areas", the state saying "you need to offer insurance to everyone or no one if you want to play here because it's fundamentally abusive if you're gonna start picking your own areas (we all know you're gonna redline into only the lowest risk/highest return areas)", and the insurance companies saying "well, wildfires are too risky so looks like we'll insure no one then."
Calling that "regulatory challenges" instead of "wildfires aren't great for insurance" is kinda a shit argument.
One of the ways that rational markets work is by allowing people the results of their choices. Yes, I get that in rare cases the stack of circumstances eliminate many or all choices, but in the main people in America have some of the greatest freedoms. The statisticians are noting where the risks are higher and saying "you can have the coverage if it's worth it to you, but this is what it will cost" and competition in the insurance marketplace pressures the premium towards the average true cost. (sometimes below, because they can invest your premium)
Now, if you know you're an outlier due to lifestyle, hurricane proofing, living ontop of a hill or whatever relates to the main risks of the area, then maybe you're better off not buying it? (iirc mortgage rules don't always allow this?)
Another thing to consider is that a lot of people buy Houses like they do cars. They do not evaluate the TCO, they simply look at the monthly amount (and the smarter ones include taxes, insurance, maintenance)... in a rational market the price of houses in disaster-prone areas would be suppressed by the excess cash-flow required to pay the insurance. Really roughly speaking $50 a month of insurance should remove $5000 from the house purchase price.
Keep letting the market reward those who make rational decisions!
And the only cost is destitution for a few hundred / thousand / tens-of-thousands (/ hundreds-of-thousands?) of people, since that $12.7 trillion worth of homes will by no means be sellable on the market for $12.7 trillion if they can't be houses anymore, and home equity is 45% of the net worth of the average American homeowner.
I'm sure stripping 45% of thousands of people's net worth won't have significant economic or cultural impacts. Truly, the market is a miracle.
> I'm sure stripping 45% of thousands of people's net worth won't have significant economic or cultural impacts.
"Climate migrations" has been an alarm bell for a long time. It's just people didn't want to listen.
The issue with your statement is if it's a person or human-created entity that's doing the stripping, that's a problem we can address. When it's the environment we live on doing the stripping, well, that's simply a predicament.
If you want to get mad at someone, get mad at the groups that have been propagandizing for the last few decades that carbon is a myth and we're completely decoupled from the ecosystem we live on.
What's the solution? Having every one else pay so people can live in areas guaranteed to be hit by increasingly strong hurricanes? I pay less for car insurance now that I live in a rural area than when I did in a city. That makes sense. If you want to live in a nice climate by the beach, go for it. However, be prepared to pay for it.
At some point the rest of us have to stop paying for people's stupid behavior.
US taxpayers have funneled untold billions of dollars into these states to prop up their real estate industry by providing FEMA flood insurance at hugely subsidized rates, while the private insurance that's becoming unaffordable only covers wind damage. When you see those photos of towns wiped away by a hurricane, that's flood damage, and your tax dollars are paying to rebuild those houses in the same place. Over and over.
In a just world there would be legal liability for some of the real estate industry folks who persuaded people to put all of their net worth into an asset that's going to be blown away in the next hurricane, and other consequences for the politicians who enabled and encouraged them. The odds of this happening in real life seem to be about zero.
My preferred solution would be to declare unlivable areas national parks and buy out the homeowners via eminent domain (at a quantity that lets them maintain a significant percentage of their home equity, since the home is no longer sellable).
Regardless of climate change: punishing people for where they live is, historically, a great way to kick off a revolt or a civil war. People need to move out of storm zones, but the move needs to be executed mercifully or those who are forced to move will have little incentive to consider themselves members of society (to everyone's detriment).
My real point commenting initially though was that this situation is an excellent example of the failures of raw capitalism. Raw capitalism is a system perfectly willing to allow, admit, and increase inequality of outcome based on deviation from initial conditions. In contrast, societies only work long-term if there are some guardrails on inequality of outcome (otherwise, what is the point of cooperation?).
If ten or a hundred thousand people are at risk of losing half their net worth, that's the kind of thing a functioning society should probably step in on to lower the burden.
This is one of those annoying thorny issues. Looking at the farmers recently asking for government handouts. The writing has been on the wall for at least a decade in Florida. You build a home at ground level near a flooding zone and bad things happen.
That's the thing though, right? If everything is getting continually more abundant (it is), and most people aren't getting more wealthy most of the time, shouldn't that be considered a problem?
Yes, market self-regulation is an inherently violent form of regulation. There have to be victims first, before the thing can change.
This is one reason why legislation is a smarter, better form of regulation. But capitalists rely on promoting the evil in people, and do not care about anyone but themselves. So it is preferable to them.
investing has risks involved. Everyone knows that house values can go down after 08. It is well past time to stop subsidizing people who want to live in disaster prone areas. They can live there, but they have to pay to rebuild their own stuff
It's not just an incentive to home buyers, it's a shift-left that will make it all the way to developers. Homes will only be built that are affordably insurable, whether that means better location or more disaster-proof construction.
Good. And the people that can afford to build to those standards would be able to afford to rebuild after a disaster instead of having to use insurance. As they say, "it do cost to live in paradise".
I have sympathy for people living in a place where FEMA redraws the flood plain maps. They bought a home outside of the flood zone and with the stroke of a pen, their home is now inside the zone and can no longer afford to live there.
A group in Houston sued the city there over something like this and their argument was that redrawing the map was an unconstitutional taking of the land.
What do we do if the flood risk really has changed?
A summer camp in Texas was flooded this year and had fought against their land being moved into a flood risk zone on the map. They were able to beat it in court but not in reality, and children died.
I am both unsurprised and extremely disappointed with the amount of people saying "good, they shouldn't be living there".
Good luck telling that to the family trying to live close to their support network, or the old woman who has to sell her home to go into care, only to find her house is now worth so little she's a couple hundred K in debt.
Ok, if that's what you believe sure. Just be honest about that you don't care about economically killing a couple million people instead of hiding behind "but they bought their house as an investment" when you don't even know if that's why they did that.
I setup up a dichotomy, but I didn't define what equality consistutes.
A reasonable conversationalist would interpret it as either we allow inequality with its consequences or we seek a more equal society where people are being helped out of their misfortunes.
Regardless, this is a wild detour you are taking? It is completely fine to just stop and use your time on something more productuve.
Yes it is hard to move, but this logic never leads to the problem being fixed. Eventually these people will need to move, now is as good a time as any.
I'm not saying that it wouldn't be better to move them, but you can't just say "fuck you, fuck your family, fuck your parents. You are going to have to move but you cannot sell the pile of bricks for shit and you'll have to take the hit because we can't be arsed to care for our people"
If you can get an administration in the state who cares about people and wants to help them move without ruining their lives, I'll donate some money to that effort. Or even to a political campaign trying for it. Best of luck getting a better party in office.
> In some coastal U.S. cities, it’s not just the hurricanes and floods putting homes at risk, it’s the cost of insurance itself that’s becoming unsustainable
It is the disasters that are causing the insurance to become unaffordable.
You can go read the financial reports for these insurance companies. They are losing money hand over fist in disaster prone areas. The industry as a whole typically loses money on underwriting home insurance, at best they have a year or two in a decade where they make a point or two in profit.
Fundamentally the goal of an insurance company is to pool risk and distribute it so that catastrophic events can be covered. These areas have too much risk (and certainty in the occurrence of catastrophic events) for the pooling to be viable.
Home owners in low-risk regions like upstate NY actually have to subsidize the solvency of insurers offering coverage in extreme-risk regions like Florida and the south.
Everyone's home insurance premiums should be lower than they actually are. Except they're not, because we have to pay to offset the cost of all the people rebuilding their houses on the Florida coast every few years.
I mean that's kind of a strong claim. Premiums are priced by risk. If insurees of one company in Florida are getting more than they pay in aggregate, then other insurance companies which correctly price the risk in NY will take all their customers.
This only holds for government insurance programs. And in that case all taxpayers are subsidizing them.
And then there is a devastating hurricane, billions to be paid by insurers. Who you think give them money to pay?
The answer is: everyone who uses home insurance all over the world. They will keep insurance companies afloat while paing billions for the damage.
I cant say I understand this, to me it seems like if you know the averages of claims across time will be $X, then you just sell the premium for >$X . Like it could be seemingly absurd, like if you expect to replace a house every 10 years, then you do annual premium >= ($REPLACEMENT/10) . (all averaged across the pool)
The pools can be different based on the US state and the type of insurance based on the location where the insurer is doing business. For a region where a major dangerous weather event is a certainty on a yearly basis, I (a layman in insurance) would expect the premium would approach just the full cost of replacing the property rather than being something you barely think about once a year. Hence the pricing out.
Well there’s overhead like cost of administering the claims etc etc so actually if it were literally replacing the house every 20 years the annual premium would be like house$ / 10 not 20.
But if it gets even remotely close to that point the yearly insurance is a significant portions of the house worth and it’s obviously not affordable/insurable - whatever term one wants to use.
At that point if one can’t self insure then they can’t afford the house
Disaster prone areas are uninsurable due to climate change costs. This is market signal to not live or build there. Some will be sad, sadness is unavoidable.
Citations:
https://news.ycombinator.com/item?id=44477195
https://news.ycombinator.com/item?id=43366311
https://news.ycombinator.com/item?id=42450680
https://news.ycombinator.com/item?id=41664750 (top comment of this thread aggressively relevant)
https://www.hbs.edu/ris/Publication%20Files/24-051_f1329bc3-...
And seeing as my premiums have been doubling every 8 years or so, I'm assuming that cost is distributed across everybody.
Not necessarily.
A confounding factor is that construction and materials have gotten much more expensive. You aren't insured for what your house cost to build 20 years ago, you are insured for what it would cost to rebuild it after a disaster.|
The price of construction lumber quadrupled during COVID (it has since receded some), so all of a sudden the cost to frame a house went up by a significant margin, which means that the cost to insure against the future possibility of framing a house goes up too.
Can you link to one of these reports that shows a breakdown by high disaster areas?
My previous job was at an insurance company in part of the country that is not disaster prone. Even then, once in a decade hailstorms would essentially wipe out reserves and necessitate reinsurance. It would take probably 5 years to recover from the effects. You always had your fingers crossed during hail season that you'd finish the year in a position to get some bonuses. And this was a mutual insurance company, so no quarterly shareholder pressure, just long-term sustainability goals. That company would never dare expand into Florida.
Here's a white paper talking about the history of FL specifically: https://floridapolicyproject.com/wp-content/uploads/2024/05/...
You can pull the annual reports for any publicly traded insurance company if you are curious about the numbers.
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Not to mention, taxpayers across the country are subsidizing federal insurance programs for people to rebuild those homes in the exact same location.
I get ties to communities. I get "socialism" - I'm all for universal healthcare.
But maybe there are limits, you get one issue. If you live in a flood zone, your house gets rebuilt, and it floods again, maybe the requirement of that insurance is relocation.
As it stands, there are people who have had their home rebuilt three times in 20 years in the same location through insurance and FEMA. I'm not saying that from the perspective of "that must be nice" - losing valuables, all the issues with flooding, are entirely horrible and unpleasant. But at what point do we as a society say "Y'know, maybe just don't build there... again."
Alternatively maybe this could be a good case for insurance funding part of the physical infrastructure to protect the houses e.g. sea walls.
As Bill Engvall said "here's your sign." It's expensive to live in disaster-prone areas. Whether the disasters are due to hurricanes, tornadoes, wildfires, or earthquakes. You are statistically more likely to make a claim, and therefore your premium must reflect that reality.
The rising premiums serve as a brake for continued development in such areas. Not only should it drive the build-out of fewer units, it should also drive the build-out of cheaper units. Building multimillion-dollar homes in disaster-prone areas should be extremely expensive to insure.
> it’s not just the hurricanes and floods putting homes at risk, it’s the cost of insurance itself that’s becoming unsustainable
Does the high cost of insurance not directly follow from the risk of disaster? This is strangely worded.
> This is strangely worded.
Intentionally. People refuse to accept that storms are becoming more powerful while bringing much more rain. Shifting the blame to evil insurance companies is much more palatable than accepting that the climate is changing
Maybe its insensitive to say this, but isn't this a REALLY good thing and will save tens of thousands of lives?
How else do you convince people not to build and live in spots that are known to be disaster areas, in a country that has so much space that you can drive somewhere and run out of fuel?
I would go slightly further and say that a lot of this is subsidized by things like FEMA and NFIP and as such, there should be a three strikes rule. If a property makes a claim based on a disaster like this, they shouldn't be able to just rebuild there indefinitely, regardless of the cost. After the third claim, that property should be rezoned and made unavailable for development. Make it a park or at worst an open parking lot with no infrastructure.
I would argue it should happen after the first disaster. The government has subsidized houses being built in known flood paths for too long imo. If you are in a known zone and had a major loss. You don’t get money to rebuild but instead money to build elsewhere.
They have been doing a version of this for a while in some areas. The homeowner gets a bailout, but the money comes with rebuild requirements (often lifting/lofting the building above a 100 year flood level). If they are met, your property remains insurable and eligible for future help. Conversely, the owner can take the money and keep or sell the land.
The problem with this method is that it tends to gentrify the region. Wealthier people can afford to live elsewhere during the repairs, but people living paycheck to paycheck are often forced to take the money and sell the land.
The other problem is that people will rebuild without insurance.
The correct, but very unpopular decision is to forbid rebuilding in those areas.
What is a "three strikes" for if the cost of periodic rebuilding is financed by unsubsidized insurance?
"Rezoning" is a needless control that then prevents future development that might be impervious to whatever disasters caused the periodic rebuilding before.
The problem is that due to the nature of democracy, people expect to be bailed out if there is a huge disaster. If you don’t want to pay another claim, you need to make demolishing the house and rezoning the land a condition of paying the final claim.
Over the long term - probably.
Today - there are thousands of families who have to decide whether to live in an uninsured home in a disaster prone area or spend a bunch of money/uproot their lives/move elsewhere/find a new job etc. I'm going to guess most will stick with option 1, because they cannot afford the alternative.
Those families are suffering the effects of their choices. It could be that they rationally prefer the risk of devastation or the higher insurance rate, than living somewhere else. We should allow them the freedom to choose, without also subsidizing the choice.
You need to spend public money in this. Not just to save the banks.
Yeah its definitely a good thing ON THE WHOLE. It's legitimately bad for the people it affects and the sort of vindication people feel for seeing them suffer is sick.
One common reaction to this is state subsidies or regulation to make it more affordable (see this in California and Florida). While this is bad, spending money on the problem is good. People often conflate "dont subsidize" with "dont spend money." Instead they should spend it to offset the damage/inconvenience done to the people affected. Moving assistance or something. Not subsidize living in dangerous areas.
It's kind of the Warren Buffet approach to people whose livelihoods are ruined by a changing economy. It's real harm and its not fair, but you dont stop progress. You also dont say "fuck em" - you support the people who get left behind.
People had decades of warning of this happening.
Any assistance on moving out is a very bad idea. There are rising insurance costs, slowly, people have time to respond.
People in Florida did not even advocate for mitigations that would have prevented the rising costs, when they were given decades of warning.
Protecting home values above all else is very bad for society. Unless renters are given the same protection and massive handouts, it's a very unfair system
Moving the money away from insurance subsidies doesnt preserver home values.
> you support the people who get left behind.
Yes, you support the people left behind with the profits of the people who are ahead.
The US voters just hate that type of equality. And as a result the vindication is merited - that is an inherent feature of non-merit based inequal societies, just the the US is.
Having insurance doesn't save lives. The people in those homes are able to leave during the storm so they are not in danger while the insurance is left footing the bill to repair the damage. So I'm not sure where you will get tens of thousands of lives saved.
If they don't have insurance, hopefully they will leave and less new people will build houses on uninsurable land. At least some of those people will then avoid injury and death in the storms?
I read it as less insurance coverage, less people buying and building. There is always some % of folks that stick around. Over the medium and long term that probably equates to some number of lives.
... anyone got stats on what happens to mortality rates during such an evacuation?
100%. This is working as it should.
How exactly is it working? Florida's population keeps growing no matter what. Highest point in the whole state is a tiny hill.
People are indicating they feel their best rational option is to stay (or even go there).
If you know the government will throw billions to your aid, then a disaster zone is actually far less risk than if they would not.
Or maybe you just like the beaches in Miami so much that you would rather part with the money than the beauty? Still a market working rationally.
People who want to pay for the cost of replacing their homes in Florida will pay for it, and they still get to make the choice to pay instead of being forced out of the place they would prefer to live.
Correct me if I am wrong but is not most of the damage near the ocean where you get massive surf flooding? Typically a few miles inland is ok no? That’s at least what I have read in the past. Might be wrong!
I don't disagree with you on new builds and new purchases. But homeowners living in some of these areas for 10...30 years suddenly becoming un-insurable when the environment changed around them is a thorny issue.
How is that a thorny issue? What got us into this housing crisis is exactly the mindset you're displaying here: once you get yours, it's yours for the rest of time and anyone who tries to change that should be voted out.
Why do these home owners deserve more support? because what? They own some property? (Or at least the bank does)
I don’t feel sorry for these people. They made choice and the evidence this was inevitable was in front of them for 10 years at least. They don’t deserve special consideration.
Considering how we treat things like job loss, which is a good allegory here as it has all the same features of circumstance, why do they deserve special considerations that aren’t extended to other groups?
What makes you think they won't be bailed out by creating a national subsidized insurance program? The national flood insurance program only exists because insurance companies didn't consider insuring properties that are destroyed by flood all the time a good idea and stopped doing it altogether.
Maybe that's a thing the first few times this happens. But it won't be happening just once or twice.
Using public funding to keep on bailing people out is going to get expensive for everyone and won't be that popular the more often it happens. Expensive bailouts make them a natural cutting target.
The way this works out financially is that insurance prices go first. Then banks do the obvious thing which is to be reluctant to provide mortgages on property likely to suffer damage within the mortgage period. That probably is already a thing. That in turn makes existing property a harder sell and affects property prices negatively. And as a result, some property mortgages might be under water before the property is under water. A natural disaster would wipe out the uninsured property and then the mortgage. Any banks with lots of exposure to that might be facing issues if that happens.
Any public funding used mitigate that is more likely to go to these banks than the people affected. Which won't be popular.
Easy to spell this out, because minus the root cause (natural disasters), this is more or less what happened around 2009 when banks had to be bailed out because of the subprime loans. Loads of foreclosures and misery. But it was the banks that got the bailout.
The predictable end result is that after a few disasters, certain areas just won't be rebuilt again because nobody is willing to fund that. Some people might move out before the worst happens. Banks and insurers will be the first to move out. Probably sooner rather than later. That probably won't be great for people that remain since investments in public infrastructure and maintenance of things like roads will also drop off for the same reason.
It’s good for preventing new homes on those areas. Less good if you already own a home, and its value is now falling inline with the increasing premiums.
tell me you don't live in the US without telling me you don't live in the US. Everywhere is a disaster "zone", whether it's hurricanes, floods, tornados, dust storms, landslides - They'll find an excuse.
This comment about how we shouldn't be living in disaster zones is completely out of touch with A) Where people live. and B) What a disaster zone is.
Coastal cities (where 59% of people live) will say it's prone to hurricanes and tsunami's, flooding and storms. 50% increase.
Inland cities, floods and landslides - 50% increase.
Desert Towns, dust storms and tornados - 50% increase.
Mountain Towns, floods and landslides - 50% increase.
Nomadic villages of hippies and communes, tornados and floods - 50% increase.
I know not of a single home owner who's premiums didn't go up, no matter where they live.
My rural home insurance in the Midwest where the only risk is tornados has certainly gone up.
When I saw the headline "disaster-prone cities," I thought maybe they were talking about crime or terrorism or something. For something like a hurricane, everyone in the danger area would see insurance rates go up, not just those in the cities. Odd way to word it.
Those hurricane zones are being stretched all the way to Ohio.
That’s a huge misconception of how insurance works.
And those disasters are geographically off. Hurricanes are not a coastal thing for the whole nation, west coast does not get them. Tornadoes are not a desert thing. All those sound like being pulled out of a hat without actual knowledge.
Tell that to the insurance companies that upped my premium for hurricane disasters even though I don’t live near the coast.
I’m at least 500 miles inland. It no longer matters about geography and it matters whether there was ever one in the past. The last few hurricanes went deep into Midwest land so naturally, we are now in hurricane zones.
came here to say this. We really don't want to subsidize people living next to active volcanoes. If you agree with that, then you can extend the analogy to all other forms of predictable natural disasters.
FWIW, we actually do subsidize people living next to active volcanoes. If for no other reason than Hawaii is strategically significant (I think there are good humanitarian reasons also, but I'm pretty sure the US federal government would continue to see it as strategically valuable to help people in Hawaii recover from the occasional eruption regardless). https://recovery.hawaiicounty.gov/resources/recovery-grants/...
interesting, thanks for the info!
I disagree it is humanitarian to entice people to live in more dangerous areas.
This is a fraught space. Without going into deep detail, the people of Hawaii care little what mainlanders think is "humanitarian" about where they have historically lived for at least 1,500 years. And to be fair to them, it's hard to make solid assertions that a living situation is bad when it has existed for 1,500 years.
it's a good thing until it's your house. when we bought 5 years ago there had been exactly one tornado within a hundred miles of us in the entirety of the historical record. Now there's been one each of the last three years and I'm sitting in what was supposed to be the central investment of my lifetime wondering if its asset value is gonna plummet to zero while the cost for me to actually stay here is gonna become entirely unmaintainable, leaving me with no way to hold this position and no exit aside from maybe bankruptcy. Dispassionate analysis of systems is important but remembering that this system is made of actual human beings and involves what for many of them is their life's work is also important. I did everything right, went to school, got the job, built the nest egg, invested in the community (the historically non-disaster-prone community), now it could potentially all disappear out from underneath me and there's nothing I can do to prevent it.
I really do sympathize, but we are apparently all deciding not to do anything that might help with the climate so these shifts in weather patterns are unavoidable.
I hope you can get out of there before the house is unsellable, or at least get the material cost back.
You could still have people living there, but the problem is that they don't build for the kind of inclement weather they are threatened by. The building code should require all construction to meet certain levels of survivability. You never see concrete houses blowing down anywhere, but in Florida, they like to build on the coast using matchsticks....
Yes, it absolutely is. East Grand Forks, MN demolished all buildings in the floodplain after the 1997 floods. I understand Florida is bigger than East Grand Forks, but not every single person living in Florida will be priced out of home insurance at the same time, hopefully there’s enough wealthy people who can afford to self-insure to buy up all of the existing homes, but it’s unlikely and someone will have to lose money.
> East Grand Forks, along with Grand Forks, was heavily damaged by a major flood in 1997. The entire city was under a mandatory evacuation and almost no homes were spared damage. After the flood, several neighborhoods had to be demolished because of damage. The city cleared development from the floodplain bordering the Red and Red Lake rivers. It developed a large park known as the Greater Grand Forks Greenway to provide a new recreation area for residents along the river. A similar park was developed in Grand Forks. The parklands, with trees and a variety of greenery, can absorb floodwaters and help protect the cities naturally. Moving residential and business development out of these areas also helps prevent future flood damage. In addition, a new system of dikes was constructed to protect the city from future flooding. The city has since rebuilt.
Tens of thousands? Over what time period? You may be way overestimating the number of people that die from natural disasters.
Hurricanes killed around 2,000 people in the last quarter century, not tens of thousands, https://www.statista.com/statistics/203729/fatalities-caused....
Im counting all the lives lost by natural disasters, by the resulting depressions, financial issues, etc.
Its not as simple as "N people died from literally being inside the storm, therefore the number of potentially saved lives is N". There is always a domino effect from a massive disaster, even if "just" a couple of people die directly at the hand of the disaster.
The next largest category of natural disaster fatalities after tropical storms in the US is heat waves. The insurance companies aren't stopping writing polices in places that have heat waves, that's most of the country.
Next after heat waves is severe storms. Same thing. Then winter storms. Same thing.
Insurance companies are avoiding a couple particular types of natural disaster that have the capacity for massive property damage at a single point in time in a concentrated area, mainly tropical storms and wildfires. Those natural disasters just don't cause many deaths in the US.
Tens of millions of people live in those areas. If you're going to talk about "the resulting depressions, financial issues, etc." you might want to give some consideration to tens of millions of people being forced to move, to risk going uninsured, or losing their homes.
I'll limit the scope of my reply to hurricane zones as wildfires and flooding are a bit different.
People in hurricane zones are used to evacuating and have plenty of advanced notice. For the vast majority of the time they're able to enjoy a healthy beach lifestyle - relaxing, great climate, fun hobbies. It's extremely rewarding to live near the beach. I'm sure there are studies that show positive impact to health and healthspan outcomes as well.
The problem is that America was for several generations living in a privileged bubble. The post-WWII period was very good for us. We could afford to build, rebuild, and rebuild again. Labor costs and material costs were low, and there wasn't overwhelming demand. This advantage lasted for a whopping 50 years as we transitioned from strength to strength, shifting from a manufacturing economy to a robust consumption and services economy.
Until recently, it didn't cost a million dollars to put a home near the beach. What's changed is the economic position of the country and the financial capability of the average American. We can't build houses for $60,000 anymore.
This is less a signal of "insurance getting smarter" and more of a signal the outsized advantages of America are coming (have already come) to an end.
If you want to constantly rebuild your house, be my guest, but you're going to have to pay a lot for the nice climate and beach property in that case.
the post war economy was an aberration when the rest of the world was recovering from being bombed to hell, it was never going to last forever. excesses like cheap rebuilding are just not as good of an idea of building to last in safe areas.
So, in other words, it's a "really good thing".
Florida shorelines used to be full of little fishing shacks and beach cottages. If hurricane winds tore it down or it floated away in a storm surge it wasn't the end of the world to replace it because costs were reasonable.
It's a totally different story now that the average beachside "home" is a $10 million dollar mansion.
Katrina runs counter to your point. Even Miami itself does without Katrina level disasters
Skipping past all of the other negatives about living in a known disaster prone area, we couldn’t afford to rebuild even back then without endless deficit spending. As I speak, New Orleans is still in the process of rebuilding post-Katrina decades later.
> This is less a signal of "insurance getting smarter" and more of a signal that American excess is coming to an end.
They’re not mutually exclusive.
Well in the end it evens out in making more people homeless.
Here are your choices: a 800k house that require you to work 18 taco bell/gas station/home depot shifts per day OR out in the boonies where if you want insurance you need to work 5 shifts per day. Both are impossible, so you just work 3 shifts and don't have insurance and use food stamps to eat.
There stories are not well distributed but people that get priced out of cities end up buying a singlewide/double wide or just rent and then the house gets destroyed and they have no insurance and end up entirely on the streets.
So yes it is definitely insensitive to say that. Perhaps you would understand if your cushy tech job was 25k per year instead of 225k.
How does it make more people homeless? Insurance absolutely is a good proxy for real risk and there are plenty of places to be building homes. If you live in a flood zone you can still get the government to help cover some of the risk but also… flood zones are not new. I don’t really want to incentive people to continue to buy and build in these areas. Use the dollars to rebuild elsewhere.
Insurance was not supposed to work this way first of all.
You're a woman so we're going to charge you double for health insurance because you know, your boobs might get lumps.
I do agree with people that "rebuild and rebuild and rebuild" in the same area without the codes catching up.. I think if someone is wealthy enough they can afford james hardie siding ALL the way up - for example in a fire zone.
I think the insurance should be the same cost but the payout should be capped based on the decisions that are made.
> Insurance was not supposed to work this way first of all.
Insurance is a mechanism to transfer risk, this is exactly how it works. Actuaries calculate risk, and then the insurance company sells a policy they think they can make money on based on the calculated risk.
US health insurance isn’t insurance, it’s just called insurance for whatever reason.
Because when people get priced out of their existing homes they often find that they can't afford houses elsewhere either.
How is this the fault of insurance companies? Building more houses would fix this issue, not pushing the narrative that people are entitled to a plot of land for eternity.
Right, and not just entitled to the plot, but entitled to have the pitfalls of that plot negated by society to their benefit.
If you can't afford the insurance you definitely can't afford the disaster damage, so unfortunately those cities need to shrink?
The tinfoil hat part of my brain suspects that jacking insurance rates up is a good way to get people to vacate land so it can be owned by the very wealthy only. Declare the land "too dangerous" to live on, homeowners get priced out because they cant afford the insurance plus mortgage, somebody buys all the land up and magically it gets reclassified as safe. A sort of insurance-based blockbusting. This time though it's nationwide.
As it should be?
Yeah sounds like it's working as designed to me too
Indirectly it saves lives by making it hard for people to live in places where they are likely to get injured or killed by natural disasters.
It could also incentive people to use constructive methods more adequate to the place where they want to build.
If you live in hurricane/tornado land, probably you'd better use bricks/concrete blocks in a sturdy steel or reinforced concrete frame with a deep foundation.
Unfortunately, unless we install some kind of back-stop to facilitate people moving without ruining themselves (since the median American has a little under half their net worth tied up in their home), this will be a messy transition. You can't sell those houses to afford to move elsewhere since the whole problem is they can't safely be houses anymore (as the sage said, "Sell them to who, Ben? F**ing Aquaman?").
We will all pay the tab to restructure society to avoid this climate change effect, or we won't and we can expect the people who get screwed to not be particularly invested in being part of this society.
I didn't move to Florida for a reason. They voted for this repeatedly and are still doing so. No sympathy from me, sorry.
It's less about sympathy and more about practicality. How well does the country fare if an entire state suffers unmitigated disaster?
... and if the country is willing to let its state suffer unmitigated disaster, what good is the country?
(Your wise choices mean you will likely come out on top regardless of how high your mountain is relative to the people who chose poorly. How concerned are you that your peak could be a little smaller because you live in a society with 340 million other people, half of whom are below average intelligence... And those people need help?)
This is what is supposed to happen, this is a balancing effect.
While the article refers to Florida and Louisiana, due to increased precipitation density we're seeing more intense flooding happening more frequently in areas that aren't near the coast but are near a river. Many small towns in New England were established near a river for power and transportation. In some cases, they've now been flooded on the same day three years in a row.
These didn't used to be disaster-prone cities, but they are now.
Even if shelter is or should be fundamental human right. Shelter in specific location subsidized by others is absolutely not one. There is nothing sane stopping making areas with less risks denser. Thus overall saving costs for everyone.
Indeed. I, for one, would be in favor of turning hurricane zones into national parks, eminent-domaining those properties for 90% of cost, and federally (or state with federal funding) facilitating moving those families inland.
It won't be painless, but it'll be less painful than letting the market try to solve it and telling them "Good luck selling your stick-pile when everyone knows it's not safe to live here anymore!"
> moving those families inland.
Inland from the coast of Florida is a swamp. Is that really any better? I know the orange man is a fan of draining swamps, but I'm pretty sure that's not what was meant. People don't live in deserts. People just need to accept that the opposite of no water can be just as in hospitable
Inland from Florida is states to the north, I think, ones without coastlines. Alabama or Tennessee?
that's a very strained interpretation of the meaning of inland
I would agree, but there is one issue.
Where will people move, without a huge amount of homes being built, where will they move to ?
If the move, even with their current insurance rate, their payments/rent will probably cost much more then they are paying now. Especially if their home is paid off.
We should get a huge amount of homes being built for other reasons tbh
How do you short florida real estate?
Paying essentially a 3% tax on your home so you can keep living in a place with depreciating home values[1] is wild. In an ironic way it reflects the financial illiteracy culture (faux rich people who are deep in bad debt) of Miami.
[1]https://www.zillow.com/home-values/14/fl/
Nailed it, mic drop >>> "reflects the financial illiteracy culture"
However for every Ying there is also a Yang so I too am interested in any factual data based replies or guidance please. And no, I am not looking to short REITs.
Some family members that owned in Florida for a decade sold a few years back after their costs began to balloon while other family members are still looking to move there in the coming years. Some can see what is unfolding, most cannot, yet all will pay given the systems current implementation.
I see many comments along the lines of, "Good, this is how the market should work" as if displacement is a desirable outcome. Reasoning from first principles, the world we want is one in which we have fewer disaster-prone areas, not more. This would mean lower insurance rates, and fewer instances of displacement. This is a symptom of a deeper problem.
I think everyone here agree that climate change should likely be addressed.
But don't tell me that home owners in Florida don't drive cars.
Well, very fair, but we're not solving climate change or reducing the exposure to disasters. Sorry about that, I really would have liked it to happen too.
I think you pointed out the deeper problem here:
> as if displacement is a desirable outcome
Maybe we shouldn't treat housing this way. A house gives you shelter and somewhere to sleep at night. I'm not advocating for a chaotic system that forces you to move every year but rather something that gives you options in the case that something does go sideways (i.e. a much bigger housing supply)
I would say that displacement from a disaster-prone area is a good outcome, yes...
Isn’t homeowners insurance subsidised in the US in some places, especially in high risk areas?
I can‘t find good resources on this - is there a logic behind this beyond pleasing the people that have vested interests in those areas (like owning a home)?
Flood insurance specifically. Flood insurance in the US is often provided only by government entities because private insurers have all pulled out of that insurance market.
Problem is when the only provider of waterfront insurance is government taxpayers, that kinda looks like people who own waterfront property have convinced everyone else to subsidize their lifestyle.
Yes it often is. E.g. https://www.floodsmart.gov/
Insurance seems like one of the last bastions of sound thinking.
It has been said "You don't have to believe in climate change, the Insurance company will believe in it for you".
And they believe that it's happening now.
> You don't have to believe in climate change, the Insurance company will believe in it for you
This is spot on. I once commented on a WSJ article reporting a similar story. The climate change deniers were in full force on that comment thread. They hated my pointing out that it doesn't matter whether they believed in climate change or not. They still have to pay the higher insurance.
Spreadsheets don't care about your feelings.
Weather =/= climate. Hurricanes have been happening forever, and to imply the winds are 3 mph faster or something is silly, while implying the hurricane only exists due to your genre of politics is lying
What do you think is causing higher risk, then? If you have a non anthropogenic model I would be interested.
Either way the insurance is driven by data on the ground, and I think they're fairly trustworthy about keeping their own costs down. If they say it's uninsurable it probably is a risk.
You could read the article? It has to do with regulatory changes, rising fraud, and a string of hurricanes which drove prices up in FL and temporarily reduced competition. Since then rates now seem to be growing behind the rest of the nation as more small insurers enter the FL market and compete.
What is important to remember though is weather event =/= climate change. We expect a certain amount of randomness in hurricanes and natural disasters, and saying a year with more hurricanes is due to climate change is the same as saying a cold winter disproves global warming/climate change.
C'mon. You can do better than this tired denier line.
No one's saying hurricanes only exist because of someone's politics. The insurance beancounters are very much saying the winds are faster, more frequent, and do more damage than they used to.
And there's nothing silly about the billions of beans they're counting.
> No one's saying hurricanes only exist because of someone's politics
The comment I'm responding to says this, and you seem to be implying it as well. Insurance rates aren't going up because there are more hurricanes, they're going up due to regulatory changes, fraud claims, and rising costs/inflation. The article blames a 0.5 increase in insurance rates in FL due to fraud, and regulatory challenges in CA.
I'm sure climate change plays a role, but saying the hurricane being 1% stronger is to blame for high insurance costs is nonsensical and doesn't track logically.
from tfa:
> Experts say the spike is driven by climate change making disasters more frequent, the rising cost of construction materials, and a flood of lawsuits in coastal states that drive up payouts for insurers.
Sure, lawsuits/regulatory issues is a contributing factor. #3 behind #1: climate.
But even so, the "regulatory challenges in CA" are insurance companies saying "we don't want to insure wildfire areas", the state saying "you need to offer insurance to everyone or no one if you want to play here because it's fundamentally abusive if you're gonna start picking your own areas (we all know you're gonna redline into only the lowest risk/highest return areas)", and the insurance companies saying "well, wildfires are too risky so looks like we'll insure no one then."
Calling that "regulatory challenges" instead of "wildfires aren't great for insurance" is kinda a shit argument.
> The comment I'm responding to says this (hurricanes only exist because of someone's politics)
In no way, shape or form do I say that.
One of the ways that rational markets work is by allowing people the results of their choices. Yes, I get that in rare cases the stack of circumstances eliminate many or all choices, but in the main people in America have some of the greatest freedoms. The statisticians are noting where the risks are higher and saying "you can have the coverage if it's worth it to you, but this is what it will cost" and competition in the insurance marketplace pressures the premium towards the average true cost. (sometimes below, because they can invest your premium)
Now, if you know you're an outlier due to lifestyle, hurricane proofing, living ontop of a hill or whatever relates to the main risks of the area, then maybe you're better off not buying it? (iirc mortgage rules don't always allow this?)
Another thing to consider is that a lot of people buy Houses like they do cars. They do not evaluate the TCO, they simply look at the monthly amount (and the smarter ones include taxes, insurance, maintenance)... in a rational market the price of houses in disaster-prone areas would be suppressed by the excess cash-flow required to pay the insurance. Really roughly speaking $50 a month of insurance should remove $5000 from the house purchase price.
Keep letting the market reward those who make rational decisions!
As it should.
Another problem is full insurance payout requires rebuilding on the same lot as the one struck by disaster.
Insurance will be the great lever of climate change.
This is market self-regulation working as intended
And the only cost is destitution for a few hundred / thousand / tens-of-thousands (/ hundreds-of-thousands?) of people, since that $12.7 trillion worth of homes will by no means be sellable on the market for $12.7 trillion if they can't be houses anymore, and home equity is 45% of the net worth of the average American homeowner.
I'm sure stripping 45% of thousands of people's net worth won't have significant economic or cultural impacts. Truly, the market is a miracle.
> I'm sure stripping 45% of thousands of people's net worth won't have significant economic or cultural impacts.
"Climate migrations" has been an alarm bell for a long time. It's just people didn't want to listen.
The issue with your statement is if it's a person or human-created entity that's doing the stripping, that's a problem we can address. When it's the environment we live on doing the stripping, well, that's simply a predicament.
If you want to get mad at someone, get mad at the groups that have been propagandizing for the last few decades that carbon is a myth and we're completely decoupled from the ecosystem we live on.
What's the solution? Having every one else pay so people can live in areas guaranteed to be hit by increasingly strong hurricanes? I pay less for car insurance now that I live in a rural area than when I did in a city. That makes sense. If you want to live in a nice climate by the beach, go for it. However, be prepared to pay for it.
At some point the rest of us have to stop paying for people's stupid behavior.
US taxpayers have funneled untold billions of dollars into these states to prop up their real estate industry by providing FEMA flood insurance at hugely subsidized rates, while the private insurance that's becoming unaffordable only covers wind damage. When you see those photos of towns wiped away by a hurricane, that's flood damage, and your tax dollars are paying to rebuild those houses in the same place. Over and over.
In a just world there would be legal liability for some of the real estate industry folks who persuaded people to put all of their net worth into an asset that's going to be blown away in the next hurricane, and other consequences for the politicians who enabled and encouraged them. The odds of this happening in real life seem to be about zero.
If only someone warned us about the impacts of climate change
Not much sympathy here. When you buy a house you buy into these risks. You jumped on the FOMO wave out of greed, you take the consequence yourself.
If you don't want that speficikt risk, then rent and invest the difference in broad etfs - it will typically put you equivalently.
Do you have a good alternative as storm damage looks to get worse in the future?
I'd be interested in relocation programs or something but I can't see how the value of the houses can be preserved.
My preferred solution would be to declare unlivable areas national parks and buy out the homeowners via eminent domain (at a quantity that lets them maintain a significant percentage of their home equity, since the home is no longer sellable).
Regardless of climate change: punishing people for where they live is, historically, a great way to kick off a revolt or a civil war. People need to move out of storm zones, but the move needs to be executed mercifully or those who are forced to move will have little incentive to consider themselves members of society (to everyone's detriment).
My real point commenting initially though was that this situation is an excellent example of the failures of raw capitalism. Raw capitalism is a system perfectly willing to allow, admit, and increase inequality of outcome based on deviation from initial conditions. In contrast, societies only work long-term if there are some guardrails on inequality of outcome (otherwise, what is the point of cooperation?).
If ten or a hundred thousand people are at risk of losing half their net worth, that's the kind of thing a functioning society should probably step in on to lower the burden.
This is one of those annoying thorny issues. Looking at the farmers recently asking for government handouts. The writing has been on the wall for at least a decade in Florida. You build a home at ground level near a flooding zone and bad things happen.
Because that's how free markets work, everyone gets more wealthy all the time. (/s but seems many fervently believe it)
That's the thing though, right? If everything is getting continually more abundant (it is), and most people aren't getting more wealthy most of the time, shouldn't that be considered a problem?
Yes, market self-regulation is an inherently violent form of regulation. There have to be victims first, before the thing can change.
This is one reason why legislation is a smarter, better form of regulation. But capitalists rely on promoting the evil in people, and do not care about anyone but themselves. So it is preferable to them.
investing has risks involved. Everyone knows that house values can go down after 08. It is well past time to stop subsidizing people who want to live in disaster prone areas. They can live there, but they have to pay to rebuild their own stuff
Good. A price is a signal wrapped up in an incentive.
People should not live in disaster prone areas. And if they want to the cost for that should not be socialized.
It's not just an incentive to home buyers, it's a shift-left that will make it all the way to developers. Homes will only be built that are affordably insurable, whether that means better location or more disaster-proof construction.
Good. And the people that can afford to build to those standards would be able to afford to rebuild after a disaster instead of having to use insurance. As they say, "it do cost to live in paradise".
I have sympathy for people living in a place where FEMA redraws the flood plain maps. They bought a home outside of the flood zone and with the stroke of a pen, their home is now inside the zone and can no longer afford to live there.
A group in Houston sued the city there over something like this and their argument was that redrawing the map was an unconstitutional taking of the land.
What do we do if the flood risk really has changed?
A summer camp in Texas was flooded this year and had fought against their land being moved into a flood risk zone on the map. They were able to beat it in court but not in reality, and children died.
Yeah. Though in the US flood insurance of last resort is oddly a government thing.
https://en.m.wikipedia.org/wiki/National_Flood_Insurance_Pro...
I am both unsurprised and extremely disappointed with the amount of people saying "good, they shouldn't be living there".
Good luck telling that to the family trying to live close to their support network, or the old woman who has to sell her home to go into care, only to find her house is now worth so little she's a couple hundred K in debt.
Risk increased, should family live there and be killed with higher probability?
That family that themselves dicided to buy an asset that would hopefully appreciate?
We celebrate people taking home gains on their houses - as such we also happily accept people loosing on their investments.
That is the game.
Ok, if that's what you believe sure. Just be honest about that you don't care about economically killing a couple million people instead of hiding behind "but they bought their house as an investment" when you don't even know if that's why they did that.
I believe in balance.
What would you propose instead? That the government should put a ceiling on Florida house prices?
You can equally believe what you want - though that will not stop a hurricane.
A way to rehouse people that doesn't a generational destitution. How/what/where: I don't know.
The US has over the past ~40 made a system that celebrates big time winners, both of stocks, housing, etc.
There are no big time winners without big time losers.
What you are discovering now are fundamental consequences of inequality. It is not just for housing, but for all aspects of the society.
Either we celebrate the winners in an in-equal society, or we instantiate an equal society.
You can't have your cake and eat it too - neither can the losers of the Florida housing market.
Ah yes, we can have either X or Y. There's no in-between.
Any minimally intellectually inclined person can understand that it is a continuum.
So why do you suggest an either-or?
I didn't.
I setup up a dichotomy, but I didn't define what equality consistutes.
A reasonable conversationalist would interpret it as either we allow inequality with its consequences or we seek a more equal society where people are being helped out of their misfortunes.
Regardless, this is a wild detour you are taking? It is completely fine to just stop and use your time on something more productuve.
Yes it is hard to move, but this logic never leads to the problem being fixed. Eventually these people will need to move, now is as good a time as any.
I'm not saying that it wouldn't be better to move them, but you can't just say "fuck you, fuck your family, fuck your parents. You are going to have to move but you cannot sell the pile of bricks for shit and you'll have to take the hit because we can't be arsed to care for our people"
If you can get an administration in the state who cares about people and wants to help them move without ruining their lives, I'll donate some money to that effort. Or even to a political campaign trying for it. Best of luck getting a better party in office.
Yes I can. They chose to buy a house there, this was a risk.
I mean, you totally can. That just makes you a trash person.