How bad public policy and other people’s foolishness cost you and me

Am I the only so-o-o-cialist in the world who is annoyed at the way my homeowner’s insurance floats ever upward to cover the cost of homes that people deliberately build in harm’s way? Does anyone else wonder why local governments issue building permits in disaster-prone areas and why state and federal governments do nothing to discourage or prevent people from moving into areas where lives and property are put at risk? Is there really any justification for having you and me pay when houses built in the way of floods, tornadoes, and fires are reduced to piles of ash or sodden sludge?

In 2004, disaster-related economic costs in this country exceeded $145 billion, up from the $3.9 billion annual cost in the 1950s. The problem is not so much storms and fires allegedly related to global warming but the fact that too many people are building in risky areas. In Canada, where an expanding population is moving into forest fire-prone areas, citizens saw their homowner’s premiums rise 4.3 percent in 2001 over the previous year, a rise of 9.4 percent from 1997.

New Orleans was known to be at risk of disastrous hurricane damage for years before Katrina struck. Yet people were allowed to continue living and building in districts that scientists and government agencies recognized would flood—and flood catastrophically—when a major hurricane hit the city. Little was done to rebuild the eroded marshes and barrier islands that, before human intervention, protected the site where the city stands. Many parts of the coastal Southeast are prone to powerful storms and major flooding; the Midwest is notorious for its tornadoes, yet people are permitted to live in flimsy mobile homes throughout these regions.

And then we have California: what possesses humanity to build its homes in canyons whose ecology is evolved to thrive in brushfire?

Yes. Chaparral actually needs fire to germinate. Nature has designed plants that grow along the West Coast to function like torches. They’re bombs waiting to explode. This is something that has been widely known for years. But how do we respond? We let people build deep in a fire zone, and then we underwrite their short-sightedness.

When an insurer pays to rebuild a house incinerated in one of these fires, the  operative word is we. The insurance company raises everyone’s rates to help cover its losses. This year the losses in California are likely to be huge. Topanga Canyon alone houses over 5,400 people. It is an area of extreme fire hazard and today is among many populated areas in the path of the vast wildfire presently consuming a large swath of Southern California, where more than 12,000 homes are at risk.

Why should firefighters lose their lives and every homeowner in the country see their insurance costs soar because foolish people insist on living in the San Gabriel and Santa Monica mountains, areas where wildfires and mudslides are part of the local environment’s natural cycle? Instead of relying on insurance companies to cover untoward and foolish risk and then screaming when the companies refuse to insure homes in disaster-prone regions—or raise premiums out of sight—we should be passing laws that prohibit people from deliberately building  structures whose likely destruction will hit everyone’s pocketbooks.

Now, I yearn to get out of the city’s anthill as much as anyone else, and if I had enough money to build a manse in the Santa Monica hills, I’d be sorely tempted. But maybe if people who crave and can afford a pleasant, quiet environment were forced to stay in the city with the rest of us peons, we’d all have more livable cities! If, instead of running away from poorly planned, blight-ridden urban areas, wealthy homeowners lived in their cities, the money and political influence they would bring to the urb would fuel renovation, improvement, effective crime control, enforcement of noise abatement laws, better schools, walkable shopping districts, decent public transport, and green space.

And the rest of us would have lower homeowner’s insurance premiums.

Image: David S. Roberts, The Harris Fire on Mt. San Miguel
One homeowner died in this fire; his teenaged son suffered burns, as did four firefighters who attempted to rescue them. Four migrant workers also are thought to have died in the Harris fire. Nine hundred thousand people were evacuated, and a power emergency was declared after several major transmission lines, including the 500,000-volt power line from Arizona to San Diego, were damaged.
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frugalscholar September 2, 2009 at 8:54 am

Re Katrina–It wasn’t the storm per se, but the levees, under the Army Corps of Engineers. That’s federal funding. Also, the wetlands were allowed to erode.

I do agree with part of what you say, however.

winona September 2, 2009 at 9:21 am

I normally love your blog and respect your opinion. However, I detect a tone of smugness from many frugal bloggers and particularly in this post. I live in a high-risk wildfire area in Los Angeles (yes, one of the foothill canyon communities). I moved there because I could not afford to buy a house and renting a house in the urban areas was actually more expensive than the little cottage I now call home. Yes, I could choose to live in a cheaper apartment but in your 40s, you sometimes want a home without shared walls and renting one seemed a good option. We love nature and horses and love living here despite the risks.

Are we any more foolish than the millions of people, like yourself, who live in a desert? After all, man is pumping water into desert communities and that isn’t natural or cost-effective in the long run. The problem also lies in the fact that natural disasters happen almost everywhere. If no one lived in quake-prone California or flood-prone New Orleans, then do we all move to the few areas where natural disasters never happen? Where is that, by the way?

As for others subsidizing my foolishness, I am a tax-paying citizen and have been for many many years. I know a couple who could not afford one child yet decide to have two. They take advantage of family and government assistence, tax breaks for children etc.. just to scrape by. They don’t live in a disaster-prone area but their foolishness cost me as a taxpayer.

Like I said I respect your opinion but I hope you know that there are two sides to every story and not all canyon dwellers are rich.

funny September 2, 2009 at 10:24 am

@ Winona: Agreed, many (maybe most) people are in a position where they have to live in areas that put them at risk. In California, being able to even rent a house a hefty commute from your job (to say nothing of buying one!) is a significant financial accomplishment.

Most of California, certainly in L.A. area, actually is desert: water is piped long distances to fill the large population’s needs, and the river that once flowed to the ocean there is now an empty concrete ditch (or was, the last time I saw it). The desert cities of Phoenix, Tucson, and Las Vegas in fact are modeled after the planning strategy that resulted in the sprawl that is L.A. (sometimes I think our City Parents studied everything L.A. did wrong and then went forth and did likewise!).

Tucson actually has some fairly sensible water-use regulation, since much of their supply comes from surface water, but the Phoenix area seems to be blessed with more golf courses than children, and we went through a particularly demented period in which builders took to laying out tracts around ridiculous artificial “lakes.” Now, however, developers are required to prove that a 100-year supply of water exists before breaking ground. By whose standards this 100-year estimate is made remains to be seen…but at least it’s an effort in the right direction.

It’s highly dubious whether enough water will be available over the next century to supply the number of people who are already here, even in the major cities that have managed to glom onto sources supposedly guaranteed to keep them going into the foreseeable future. But really attractive smaller cities such as Prescott and Flagstaff are already having water problems, even as more and more people move there.

Is running out of water exactly a natural disaster? It seems to me to be more a case of human short-sightedness. If you’ve ever read Cadillac Desert, you’ll know that these issues were recognized many years ago. Reisner wrote the first edition in the early 1990s, and even then what he reported was not exactly breaking news. But despite the widespread knowledge that the plans laid for the Central Arizona Project and distribution of water among the Four Corners states were based on a period that was freakishly wet, a heedless leadership (many of whom were developers themselves) and a greedy construction industry pushed ahead with luring hordes of people to settle here, at one point blading irreplaceable desert lands at the rate of an acre an hour. In fact, the “drought” conditions we’ve seen for the past decade or so are closer to the historically normal precipitation in the Sonoran Desert and Colorado Plateau, and so it’s reasonable to expect that over a century we will not have enough water to support a larger population. Or possibly even the population already settled here.

Who will pay for this bad policy? I don’t know. Probably the taxpayers. Homeowner’s insurance won’t cover your loss on a house rendered worthless because there’s no longer enough water to take a shower or flush the toilet, to say nothing of running a dishwasher, clothes washer, and swimming pool. Many who live here believe the vast outlying suburbs will be abandoned, left to crumble into the ruined desert: Styrofoam-and-plaster ghost tracts. Others think they will become huge slums as property values, already vastly deflated, fall deep into the low-income range and stay there. Whatever happens, you can be sure someone will end up paying for it, and that someone probably will not be the developers.

funny September 2, 2009 at 9:50 am

@ frugalscholar: Exactly! The feds, Army Corps included, knew that the levees needed to be improved (expensively) and neglected to take the necessary steps. And erosion of the wetlands has been an ongoing issue for many years; again, scientists and engineers recognized that the degradation of the wetlands put the city at increasing risk as each year passed.

In the case of Katrina, the losses can’t quite be laid at the feet of individual homeowners living in harm’s way, because some of the hardest-hit districts were low-income areas. It’s reasonable to conclude that most folks living in inexpensive housing couldn’t afford to move to higher ground. But…where was the leadership? Why, given what was already known about the risks (experts quoted in the Scientific American article feared that as many as 100,000 people could die in a major flood), why was low-income housing not built in safer areas? Why were the levees not shored up before a huge hurricane bore down on the populace? IMHO, it’s as much the responsibility of the governments that knew about these issues as it is that of citizens living in the area.

Think of it. Credible experts warn that a hundred thousand people could be killed in flooding associated with a major storm; a million people trapped inside the bowl that New Orleans occupies; another million in neighboring suburbs. For god’s sake. That’s TWO POINT ONE MILLION HUMAN LIVES! And little or nothing is done?

IMHO, insurance companies (and their customers who pay premiums, who comprise a far smaller group than the entire citizenry represented by the US and Louisiana governments) should not be expected to bear the cost of this kind of bureaucratic and elected-leadership stupidity. Maybe it takes a tax increase to cover the results of such incompetence to make voters understand what “kill the beast” really means.

Leah September 2, 2009 at 1:00 pm

Yep, we are known for tornadoes here in the midwest, on average the US has about a 1000 a year. But you fail to connect the price tag of the various disasters. Hurricanes cause an average of 10x the damage of annual tornadoes (per NOAA.)

Then you have the fires in the west burning multi-million dollar homes, the man hours fighting/containing/preventing those fires. Anyway, I’m sure the associated costs are way more than those for annual hurricanes.

It’s all relative.

Oh, I’ve heard it said ‘the next war will be fought over water.’ Just something to think about for you folks in the desert southwest.

funny September 2, 2009 at 1:25 pm

That is interesting about the relative damage of tornadoes. Also, I gather that many Midwestern homes have storm cellars where residents can seek shelter. To some extent the structures themselves might be built to resist wind damage.

Many of the homes at risk in California are modestly priced, as Californians seek housing in far-flung suburbs because of the high real estate costs in or near cities. Here in Arizona, a spate of wildfires will quickly reveal the number of people who have retirement homes, vacation homes, or longtime family homes in forests and brushy areas. Some indeed are very fancy structures, but some are just normal houses and mobile homes.

LOL! Water runs uphill toward money!

winona September 2, 2009 at 1:41 pm

Thanks for responding to my comment. I’m always amazed at your depth of knowledge! Yes, we’re both living in desert communities and time will tell what becomes of these.

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