Government Subsidies Encouraged Millions To Move Into Hurricane Ian's Destructive Path

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The extent of the havoc wreaked on Florida by Hurricane Ian—now downgraded to Tropical Storm Ian—is still unclear, but it is apparent that it caused major damage from which Floridians will need ample help recovering. Millions of people are reportedly without power and an untold number of homes have been destroyed after the Category 4 hurricane pummeled Florida's coast for most of yesterday.

Florida Gov. Ron DeSantis said that Ian would rank "one of the top five hurricanes to ever hit the Florida peninsula." He has asked President Joe Biden to issue a major disaster declaration for all Florida counties, which would open up access to all sorts of federal assistance programs.

"DeSantis also requested President Biden grant the Federal Emergency Management Agency (FEMA) the authority to provide 100% federal cost share for debris removal and emergency protective measures" for the next 60 days, his office said. These moves would shift much of the cost of recovery from the storm to the federal government.

This should hopefully be a humbling moment for DeSantis, who has spent ample time not only criticizing the Biden administration (fair!), but also baselessly accused Biden of hating Florida and stiffing the state's storm victims. (It should also make DeSantis think twice about wasting state money on political stunts like tricking migrants into going from Texas to Martha's Vineyard.) DeSantis' tune this week has already been much different, talking about how people need to work together across party lines and how he's thankful to the Biden administration for wanting to help. But knowing DeSantis' penchant to infuse everything with partisan bombast, this kumbaya attitude seems unlikely to outlast Ian's immediate aftermath.

In any event, the situation brings up the question that natural disasters like this always do: Why do governments keep subsidizing houses in hurricane zones?

Sure, some people would live in risky areas no matter what. Some live in these areas already and can't afford to move. But government intervention in the insurance market has helped many more people move to these areas since the 1970s—as this piece by Scott Beyer explains:

Every year, homes get flooded from natural disasters like hurricanes. Afterwards, people suggest that others should not be living in flood-prone areas. Yet that's where homes continue getting built, only to be flooded again – as might be predicted.

One reason why: the federal government incentivizes people to build homes in flood plains by offering subsidized flood insurance.

The National Flood Insurance Program was created in 1968. Before the program, few private companies offered flood insurance – it was considered unprofitable. People chose to not buy flood insurance because it was expensive. But after every natural disaster, the federal government had to bail out homeowners in flood-prone areas. After Hurricane Betsy in 1965, the first storm to cause over $1 billion in damages, Congress passed the National Flood Insurance Act.

There were some good rationales for the federal government to enter this industry. Private companies were unwilling to do it. Congress thought they would save money on rebuilding homes by offering insurance. Floods affect many homes at once, so it's not an individualized risk like car accidents or fires.

Even though this program had good intentions, it's been a disaster.

(See this Cambridge University Press paper, as well as these Reason pieces, for more on the history of the National Flood Insurance Program.)

Since the program started, tons more people have moved into flood zones. In Florida, for instance, millions of people in the past 50 years have moved into what became Hurricane Ian's path. And many new homes in risky areas were built to accommodate this. While some of these folks would surely have moved regardless, it seems likely that many would have been turned off if they couldn't get relatively inexpensive flood insurance.

And the federal government isn't the only entity subsidizing flood insurance. In Florida, the state-backed Citizens Property Insurance Corporation recently "reached 1.055 million policies — more than double the number two years ago," reports ClickOrlando. CEO Barry Gilway "said this comes as private insurers continue to drop customers to curb their losses."

Interruption of market forces has made moving into disaster zones less financially risky for individuals but much more costly for taxpayers overall, while also discouraging development in other areas and encouraging people to put or keep themselves in harm's way.


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