Rebuilding After Sandy But With Costly New Rules. NYTimes, May 8. The discussion of subsidized insurance and issues with older homes is useful to understand some of the rebuilding delays occurring currently.
Here are some excerpts:
It’s been more than six months since Hurricane Sandy hit the East Coast, yet many people whose homes were ravaged by the storm still do not know how to put all the pieces back together.By now, most know how much insurance money they have to work with, though plenty of people are still struggling to get more. But a new federal law that happened to coincide with the arrival of the storm will cause flood insurance premiums to skyrocket and require stricter, and thus more expensive, rebuilding standards
So in the most devastated communities, families are being forced to make difficult financial calculations: can they afford the new flood insurance premiums, which, at worst, can reach as high as $30,000 a year? Do they have the money to rebuild their homes to the government’s new specifications? Does it even pay to stay?
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Two readers called this article to my attention. And Ian McLean from New Zealand pointed out that his country has a similar problem with earthquake insurance in the aftermath of the Christchurch earthquakes.
Recovery Diva 
This is a difficult issue–one that needs considerable discussion.
It is important to note that unless the Fed’s flood insurance program breaks even (which is what it is now mandated to do) someone’s tax money is going to supplement a homeowner who gets it.
That would make it a redistributive policy–i.e., a form of welfare.
I live in SC–not far from the coast. Here, we have some beaches that are eroding and some that are accreting. Those who literally have the sand underneath their house being washed away want their homes–to the extent of being willing to put in rip-rap that will destroy the beach. But in the end, they are insured.
Pretty much every year we watch the Mississippi and its tributaries flood in a fairly predictable way. Yet those who are flooded out continue to restore/rebuild.
The point is pretty straightforward. There are places where we should not locate dwellings unless we are willing to pay the full freight of insuring them just as we do for regular homeowner’s insurance.
Sandy was not all that unique. The storm in the 30s was worse. It was not a matter of “if” but “when.”
Homeowners should be fully apprised of the risk they take on when they buy property that is subject to flooding–or wildfires–or earthquakes. Some buildings can be made more resilient with respect to these events–my own home is build on concrete-filled block piers with no foundation. That would allow any 100-year storm surge to pass under the house and cause minimal damage. There are ways to make homes more resistant to earthquakes and rooftop sprinkler systems can help with wildfire vulnerability.
I have seen my own private homeowner’s insurance double, then double again and then double again. If I could, I’d like to have a federally-backed wind damage insurance policy since that is why my rates have skyrocketed. Why federal backed flood insurance and not wind insurance? Before I bought my present home (in an “A” flood zone) I elected not to buy one I really like that was in a “V” zone (subject to wind-driven waves in a storm) because of the (then) high insurance rates. So, I bought my home fully aware of the risks I was assuming.
Sooner or later we are going to have to face the fact that what we pay in insurance is relative to the risk our homes face. Sooner or later. Otherwise we continue to subsidize those who make unwise decisions.
I bite my tongue as I write this because I know that some homeowners will suffer–and I would wish that they did not have to.
AAF
The inestimable Dr. Felts is right on! We must have compassion for those in the bind, but they are the ones who put themselves there. One way to improve the situation would be to have an incentive system in place that would reduce insurance costs for homes with features that minimize the impacts of the perils they face, whether hurricanes, wildfires, or floods. The Federal Alliance for Safe Homes (FLASH) and their partners are actually working on such a system, and have a workable prototype. The tough part will be to get insurers (and, potentially, others) to offer attractive incentives.
However, it ultimately will be a good thing if – as part of building back better – we don’t rebuild as much.