Flooded Out

Two articles of interest today re coastal sea-rise. Well, actually, re the cost of pretending it isn’t happening — including the cost to those who live nowhere near the sea.

Insurance.

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. In Queens, on Staten Island, on Long Island and at the Jersey Shore, many families have clung fast to a modest coastal lifestyle, often passing bungalows or small Victorian homes down through generations, even as development turned other places into playgrounds for the well-to-do.

New Insurance Rules

And though it may seem hard hearted that middle and lower classes are “being forced” out of the homes, here’s the deal

…it may come as a surprise to American taxpayers that they are on the hook for at least $527 billion of vulnerable assets in the nation’s coastal flood plains. Those homes and businesses are insured by the federal government’s National Flood Insurance Program.

You read that right: $527 billion, which is just a portion of the program’s overall liability of $1.25 trillion, second only to Social Security in the liabilities on the government’s ledgers last year, according to government data.

The flood insurance program was created by Congress in 1968 to fill a void: because of the risk, few carriers provided flood insurance. Now, private insurers offer flood insurance in a partnership with the government — but taxpayers shoulder all the risk. It has turned out to be a bad bet. The program is $18 billion in debt, a sum the government acknowledges probably will never be paid back by premiums, and it is likely to need a new multibillion-dollar infusion to pay claims from Hurricane Sandy.

End Flood Insurance

So what to do? Seems to me it’s not just a case of flood insurance, but all perverse incentives to live somewhere that property damage and life disruption is statistically predictable to much higher than the norm. That includes those in high fire zones, river flood plains,maybe even parts of ‘Tornado Alley.” It’s all there, in the numbers.

What about offering a one-time property purchase for those staring at the stark reality? Turn the former home lots into public shore. Throw in a nice moving allowance, even free grief counseling, and give people a year to decide. If they don’t take the offer, they’re on their own: no more subsidized insurance, take your chances. And by they way, if the next storm wipes you out, no second chances. Property converts to public shore, you move and rebuild at your own expense.

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