Today seems to be the day for pointing out the obvious. The editors of the Washington Post have just discovered that federal flood insurance is regressive and subsidizes development along the coast:
Now almost half a century old, the NFIP grew out of what was, at the time, a basic reality of the insurance business: Flooding risks were actuarially imponderable, so insuring against them was uneconomic for the private sector, especially in places such as the hurricane-prone Gulf of Mexico. To fill the gap, the federal government offered coverage on two conditions: that local communities would take appropriate land-use and other measures to prevent development in risky low-lying areas; and that homeowners would pay actuarially sound premiums.
Elegant in theory, the plan gradually succumbed to real estate interests, with the result that flood insurance enabled rather than managed development along coasts and in other flood-prone areas — ultimately putting more people and property at risk than might otherwise have been the case. As it happens, well-to-do people benefit disproportionately from this program; they’re the ones who tend to build big houses on the beach. The NFIP has spent many millions of dollars to repair properties that have been repeatedly flooded.
I wonder how great a factor flood insurance really is in the development of coastal properties. In Harris County only 15% of the people carry flood insurance and only 28% of people in the areas most at risk. I’d bet a shiny new dime that the cost of insurance is a major factor and that, unsurprisingly, the higher your income the more likely you are to carry insurance.
The underlying problem is federal subsidies more generally. The State of Texas, Harris County, and the city of Houston are quite capable of dealing with the problems inherent in developing the flood-prone area in which Houston has been built, which flooded in the first year of its development and has experienced catastrophic floods frequently thereafter. And to whatever extent the federal government should provide subsidies it certainly shouldn’t be providing subsidies to the rich. But that’s where they’ll go.
In some places, banks make purchasing flood insurance a requirement for a mortgage.
Apparently, not in Houston.
It depends on the flood maps, which were redrawn after Allison to cover more territory. I had to purchase flood insurance ($1200/yr) to get my mortgage—-and I’m not on the coast. I’m several blocks from Braes Bayou. Your percentages for how many people have flood insurance in Houston seem low to me, although they may be right.
I’m relieved that you’re holding out okay, Mary. I pray that the situation doesn’t deteriorate.
With respect to how few people in Houston carry flood insurance, I don’t know whether Texans are less risk-averse or they’re confident that it isn’t a risk.
For many people, cost is an issue, but as @Mary notes, mortgage companies require flood insurance. This does not apply to those with an existing mortgage or who own their home. I am surprised that the mortgage companies do not require everybody to have flood insurance.
Floods include most/all exterior water damage. I have previously recommended for people to check their homeowners insurance policy to see what is actually covered. Damage from rain is probably not covered. Damage caused by creeks, streams, and river overflow are probably not covered. Damage from hillside runoff is probably not covered. Damage from a water main or fire hydrant break is probably not covered. This applies no matter what elevation you are at.
Anybody who can purchase flood insurance but does not is a damn fool.
My line-of-credit requires me to have coverage up to the amount of my first mortgage and the line-of-credit, and it seems reasonable to me. My only issue is that the land under my house is far more valuable than the house, and I am paying for insurance coverage of the dirt on the lot.
My biggest problem is that people who refuse to purchase it are de facto covered by the disaster relief. Again, I do not have a problem with providing low cost or free building supplies, but the non-insurance people should be required to learn how to hang sheetrock and install vinyl floors.
@Mary
I truly feel for you. (If anybody has not figured it out, I am from the New Orleans area. I am on the opposite of the much hated 17th Street Canal floodwall.)
I think the worst part was having people pick through the pile of ruined belongings on my front lawn. I started breaking, slashing, and piercing everything out there. That was my f*cking life they were picking apart.
Yes, that was my point. If you’re going to be covered by federal disaster relief anyway there is no risk.
People with federally-backed mortgages are required to have flood insurance. My understanding is that there are markets for alternatives.
First, let me say that my house is dry and we are fine. We are one of three houses on my street, all in a row, that didn’t flood. We were maybe 2-3 inches away from disaster. Truly, part of the responsibility in an area like this is personal—purchase a home where it isn’t likely to flood, have flood insurance etc. Last year I attended a talk by the director of a storm predication/education center at Rice (http://sspeed.rice.edu/sspeed/). The director previously worked in Florida. The comparison between Florida and Texas in terms of storm readiness was so stark that it would have been laughable if it weren’t so SCARY. In Harris County we have two reservoirs, both built in the 1940s—-nothing newer. And virtually all of the responsibility for flood-proofing (??) your home is put on you, the individual home owner. Businesses don’t have to provide any sort of water retention on their property unless they are larger than 10 acres. Care to take a guess at how big all of the car dealerships along the freeway nearest me are? Yeah, just under 10 acres. So more and more land becomes pavement, businesses and mega mansions build up so that water drains off their property and onto yours. We’ve been told by the city of Houston over and over that there is no solution to the flooding. Their one big bright idea this year? Widen the bayous. So they are taking away most of the public green space at the top to provide more room for water. Can’t we be ‘business friendly’ and still require some corporate responsibility? I hope so, because as the storms seem to get worse all the time, the only option I can see is to raise my house, which I would absolutely have to do if we lived closer to the bayou, or dig a moat around it. @TastyBits your experience sounds absolutely horrendous. During Harvey, the worst for me was the anticipation of what might happen, and thank goodness it never did. Our legislators seem to be too busy telling us who should use which bathroom!
@Mary, part of the purpose of the flood insurance program is that to get subsidies, local governments have to enact flood mitigation and prevention requirements. Florida is apparently pretty good at doing this. I guess the question to be asked in time is how were these policies ignored or bypassed or simply irrelevant.
Guess we need to move out of California too:
http://www.nbcnews.com/news/investigations/why-do-so-few-california-homeowners-have-earthquake-insurance-n227711