Simple Policy Proposal to Change Economics of Floodplain Development

Want to change the economics of floodplain development? Deny flood insurance to anyone who builds new structures within a floodway. Grandfather structures that already exist. But don’t sell flood insurance policies to anyone who wants to, for instance, buy a new condo in a high-rise in the floodway of the west fork of the San Jacinto. And don’t sell a commercial policy to the 50-story hotel next door.

Respect the Rivers

Harvey was a wake up call. It taught us to start respecting rivers by giving them the distance deserve. It’s time for taxpayers to stop encouraging risky developments with taxpayer subsidized flood insurance. When investors, mortgage lenders and buyers can’t get that insurance, they will turn their backs. It will be much harder to build such harebrained ideas.

Stop Subsidizing Risky Behavior

This isn’t such a radical notion. Most private insurers peg the price of insurance to risk. More risk, higher price. It’s simple. At a certain point, when behavior becomes too risky, you can’t get insurance at any price. Right now, people can get flood insurance anywhere because it’s subsidized by taxpayers. Artificially low rates encourage floodplain development and discourage conservation.

So we have a developer trying to build 3.2 million square feet next to an area where the county is simultaneously buying out homes that have flooded repetitively.

By weeding such high-risk developers out of the pool, the cost of flood insurance should come down for people who give rivers the respect they deserve and build a reasonable distance away.

Start Encouraging Conservation with Economic Incentives

For those who want waterfront views, and those who are willing and able to lose everything, go ahead. No one’s stopping you. Just don’t expect taxpayers to subsidize your insurance through the National Flood Insurance Plan. If developers, lenders, investors and buyers couldn’t get flood insurance on newly built floodway homes, demand for such homes would likely fall. Thus, developers would have an economic disincentive to buy that cheap floodplain land. Owners would leave it in timber or grass. And we could give them even bigger tax breaks for doing do. Take the tax rate on timber land in floodways down to zero.

Smarter Land Use Policies = Fewer Flooded Homes

More floodplain land might remain in the hands of Mother Nature. More natural green space would slow rain from getting to rivers and provide more natural retention. Less development in floodways and flood plains just might reduce flooding further from the river, too.

Posted by Bob Rehak on 3/23/2019

571 Days since Hurricane Harvey