How do we break the process of building in floodways and then repairing flooded homes with taxpayer-subsidized flood insurance as many as forty times?

A 66-page study by Erica Vilay and Phil Pollman, two candidates for Masters Degrees in Public Policy from Harvard, examines the broken buyout process for flooded homes in Houston floodways. The study also makes recommendations to improve the process. But they won’t revolutionize it. And that may be what this process needs.

Study Expressly Prepared for City of Houston

Prepared for the City of Houston’s Offices of Recovery and Resilience, the paper is titled “Floodway Buyout Strategy for a Resilient Houston: A Systems Approach for Breaking the Dangerous and Expensive Cycle of Rebuilding in the Floodway.”

The merit in this study is that it takes a holistic view of buyouts and examines them as one of many alternatives available to flood victims living in floodways. From the public’s perspective, buyouts have unquestionable and compelling safety and financial benefits.

Buyouts produce $7 in benefits for every $1 invested. And they take people out of harm’s way.

Speedier Options Available to People In Time of Need

But the process is slow. People have options. And, according to the study, they almost always prefer those other options. In fact, the rate of buyouts is so slow that it will take the City 60 years to meet its 10-year objective, claim the authors.

The paper cited one property that had been repaired a record 40 times. So why is it so difficult to get people to move out of a floodway into housing that won’t jeopardize their lives or lungs?

Incentives Favor Rebuilding, Not Buyouts

Vilay and Pollman examine the reasons. The incentives, they say, all favor rebuilding or selling to developers rather than accepting government buyouts.

• Tax-subsidized National Flood Insurance Policy premiums remain affordable, offset risk, and usually reimburse homeowners within 60 days after a storm.
• Selling to a developer/investor can happen within days or weeks.
• Consummating a buyout through the maze of Federal, State, County and Local government agencies can take years.
• Federal funding is slow, inflexible, and extremely complex to manage effectively and efficiently.
• At the current closing rate, it would take nearly 60 years to buy out the 7,000 habitable structures in Houston floodways, says the study. But Houston-area realtors sell that many homes in a typical MONTH, according to the Greater Houston Partnership! Even in the middle of a pandemic.

“This is a No Brainer”

So one of the big reasons people are reluctant to be bought out is speed. Their lives have just been destroyed in a flood. They need a place to live. Then along comes the government saying, “Let me buy you out. I’ll get you your money in 2-3 years. Or you can just repair your home for the fortieth time and we’ll pay for it immediately.” This is a no-brainer, say the authors.

How hard are buyouts? The authors claim that “As of January 2020, HCFCD has used $3 million out of a $10 million bucket of federal funding allocated to the City for flood events that occurred in 2015.”

Barriers Beyond Slowness

But degree of difficulty and process slowness aren’t the only reasons people shun buyouts.

• People get attached to neighbors and neighborhoods.
• They may have family living nearby.
• There may be a shortage of affordable housing elsewhere.
• Alternative housing may be farther from their work.
• They may want to stay within a school system.

Goals: Slow Inflow, Speed Outflow

The authors define two goals. They say we need to:

• Slow or stop the inflow of residents to floodways
• Increase the outflow of residents from floodways

Process Improvement Recommendations

They then turn their attention to solving these problems and present 13 “sequenced” recommendations. See below.

All of these recommendations are solid and, to a large degree, self-explanatory. They are hard to quibble with if you are trying to improve a process.

Incremental Improvements vs. New Concept

The authors never really address, however, whether incremental improvements will achieve the stated goals. Or whether we need to nuke the process and start over with a revolutionary, new concept.

As I read this study, I kept wondering what Steve Jobs, Jeff Bezos, or Elon Musk would recommend. That’s a pretty steep burden to impose on grad students. But we shouldn’t forget that Fred Smith had the idea for Fedex while still a student at Yale.

Each of those people made the world a better place by designing new products or services that leapfrogged incremental improvements in existing systems and made the old way obsolete.

Inside-the-Box Thinking for an Outside-the-Box Problem

Insi-e the-box thinking will certainly produce incremental improvements. But in the estimated time it will take government to buy out 7,000 homes, Houston realtors will sell more than 5 million. That’s 70,000% better. Which would you rather have in your employ?

So I would ask these questions. What if you:

• Privatized this process?
• Offered flood victims an “instantaneous home SWAP” as they were ripping out sheetrock?
• Made flood insurance reflect its true cost?

If ever there was a need for “business process re-engineering,” this is it.

To read the complete Harvard study, click here.

Posted by Bob Rehak on 7/14/2020 with appreciation and admiration for Erica Vilay and Phil Pollman

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