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Homeowners insurance is pricing people out in disaster-prone cities
- neves 1y agoInsurance will be the great lever of climate change.
- elzbardico 1y agoAs it should be?
- ronsor 1y agoIndirectly 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.
- shadowgovt 1y agoUnfortunately, 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.
- rjbwork 1y agoI didn't move to Florida for a reason. They voted for this repeatedly and are still doing so. No sympathy from me, sorry.
- shadowgovt 1y agoIt'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?)
- elzbardico 1y agoIt 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.
- primer42 1y agoYeah sounds like it's working as designed to me too
- nemomarx 1y agoIf you can't afford the insurance you definitely can't afford the disaster damage, so unfortunately those cities need to shrink?
- lionkor 1y agoMaybe 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?
- dbish 1y ago100%. This is working as it should.
- sonicggg 1y agoHow exactly is it working? Florida's population keeps growing no matter what. Highest point in the whole state is a tiny hill.
- epistasis 1y agoPeople 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.
- infecto 1y agoCorrect 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!
- maerF0x0 1y agoPeople 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.
- echelon 1y ago
- jklinger410 1y agoThis is market self-regulation working as intended
- shadowgovt 1y agoAnd 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.
- nemomarx 1y agoDo 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.
- shadowgovt 1y agoMy 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.
- ralfd 1y agoGood. 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.
- CBLT 1y agoIt'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.
- dylan604 1y agoGood. 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".
- acomjean 1y agoYeah. Though in the US flood insurance of last resort is oddly a government thing. https://en.m.wikipedia.org/wiki/National_Flood_Insurance_Program https://en.m.wikipedia.org/wiki/National_Flood_Insurance_Pro...
- criddell 1y agoI 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.
- nemomarx 1y agoWhat 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.
- deleted 1y ago[deleted]
- dghlsakjg 1y ago> 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.
- giggyhack 1y agoCan you link to one of these reports that shows a breakdown by high disaster areas?
- thevillagechief 1y agoMy 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.
- stronglikedan 1y ago[dead]
- dghlsakjg 1y agoHere's a white paper talking about the history of FL specifically: https://floridapolicyproject.com/wp-content/uploads/2024/05/FINAL_Florida-Insurance-Market-Report.pdf 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.
- mmargenot 1y agoFundamentally 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.
- SideburnsOfDoom 1y agoIt 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.
- floatrock 1y agoSpreadsheets don't care about your feelings.
- guywithahat 1y agoWeather =/= 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
- nemomarx 1y agoWhat 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.
- guywithahat 1y agoYou 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.
- floatrock 1y agoC'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.
- Ekaros 1y agoEven 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.
- shadowgovt 1y agoIndeed. 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!"
- dylan604 1y ago> 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
- jmclnx 1y agoI 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.
- milanhbs 1y agoIsn’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)?
- estearum 1y agoYes it often is. E.g. https://www.floodsmart.gov/ https://www.floodsmart.gov/
- floatrock 1y agoFlood 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.
- deleted 1y ago[deleted]
- segmondy 1y agoAs it should.
- aqme28 1y ago> 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.
- dylan604 1y ago> 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
- AllegedAlec 1y agoI 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.
- ponector 1y agoRisk increased, should family live there and be killed with higher probability?
- HDThoreaun 1y agoYes 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.
- AllegedAlec 1y agoI'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"
- nemomarx 1y agoIf 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.
- HDThoreaun 1y agoYes I can. They chose to buy a house there, this was a risk.
- 1y ago
- Workaccount2 1y agoHow 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/ https://www.zillow.com/home-values/14/fl/
- bokohut 1y agoNailed 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.
- cjcenizal 1y agoI 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.
- tossandthrow 1y agoI 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.
- nemomarx 1y agoWell, 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.
- d3vnull 1y agoI would say that displacement from a disaster-prone area is a good outcome, yes...
- hypeatei 1y agoI 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)
- maerF0x0 1y agoOne 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!
- xnx 1y agoInsurance seems like one of the last bastions of sound thinking.
- taylodl 1y agoAs 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.
- TYPE_FASTER 1y agoWhile 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.
- klipklop 1y agoThe 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.
- instagib 1y agoAnother problem is full insurance payout requires rebuilding on the same lot as the one struck by disaster.
- angmarsbane 1y agoThis is what is supposed to happen, this is a balancing effect.