The High Cost of Rebuilding in High Flood Risk Areas

The high cost of  insurance for reconstruction is the theme of this article in the NYTimes, Nov. 28, 2012: Cost of Coastal Living to Climb Under New Flood Rules. (Also titled Post-Storm Cost May Force Many from Coast Life.) Some excerpts follow:

New York and New Jersey residents, just coming to grips with the enormous costs of repairing homes damaged or destroyed by Hurricane Sandy, will soon face another financial blow: soaring flood insurance rates and heightened standards for rebuilding that threaten to make seaside living, once and for all, a luxury only the wealthy can afford.

Homeowners in storm-damaged coastal areas who had flood insurance — and many more who did not, but will now be required to — will face premium increases of as much as 20 percent or 25 percent per year beginning in January, under legislation enacted in July to shore up the debt-ridden National Flood Insurance Program. The yearly increases will add hundreds, even thousands, of dollars to homeowners’ annual bills.

The higher premiums, coupled with expensive requirements for homes being rebuilt within newly mapped flood hazard zones, which will take into account the storm’s vast reach, pose a serious threat to middle-class and lower-income enclaves.

The heightened financial pressure has emerged as an unintended consequence of efforts to stop the government subsidization of risk that has encouraged so many to build and rebuild along coasts increasingly vulnerable to extreme weather. Supporters of the effort acknowledged that it would squeeze lower-income residents but said it was vital for the insurance program to reflect the risk of living along the shore.

“The irony is, if we allowed market forces to dictate at the coast, a lot of the development in the wrong places would never have gotten built,” said Jeffrey Tittel, director of the Sierra Club’s chapter in New Jersey. “But we didn’t. We subsidized that development with low insurance rates for decades. And we can’t afford to keep doing that.

[Thanks for Jude Colle for calling it to my attention.]

This entry was posted in Hurricane Sandy, Insurance, NFIP. Bookmark the permalink.

One Response to The High Cost of Rebuilding in High Flood Risk Areas

  1. Claire:-

    Nice selection of stories.

    Re the first story – I get a little ticked off at the envy and angst about the 1% being the only ones who will be able to rebuild in coastal areas. Get over it. If they want to throw their money away (and create jobs for us lower-income slobs), let ’em. The only reasonable alternative is to give the rest of us money our government doesn’t have to live in places we shouldn’t.

    In fact, I’m reasonably sure that we will build back in some of the high-risk coastal areas – tourism is too important to the livelihood of the state. I’m much more concerned about the fate of the “second band” of communities one row back from the coast. Their economies are only secondarily driven by tourism. How will they come back? If they do, will they become aggregators for the poor from the coastal communities (as happened in NOLA)? The coastal communities are almost assured of a renewed revenue stream once rebuilt; where will these communities get the money to repay the costs of rebuilding? And how many our age will not rebuild because they don’t want the burden of a mortgage that might extend beyond the rest of their lives?

    Re the second story – we have another ticking time bomb on the left coast. Look at all the development that’s occurred behind (perhaps “below” is the better word) the levees in the Sacramento valley. Everything the article talked about re unconstrained and foolish development along the Jersey Shore is doubly true for the Sacramento valley. This is a much bigger disaster waiting to happen.

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