Destabilized Saturday Edition #37
Catastrophe in Florida, a way forward for the UK, the kids are alright, "It'll be fun" they said
Hurricane Ian blasted and swamped southwest Florida this week, laying waste to nearly everything in its wide path. In addition to killing dozens and leaving thousands homeless and millions without power, Ian’s huge storm surge devastated homes, cars, boats, businesses, and infrastructure. The damage was extensive:
“I believe every structure in the city of Cape Coral has been damaged, from a shingle that's been damaged to catastrophic damage,” [Fire Chief Ryan] Lamb said. “It’s been a catastrophic event for the city.”
He said the recovery process will take years.
“[T]his is a pivotal impact event for the city of Cape Coral, this is going to affect the way we operate and do business for a very long time.
And it wasn’t just Cape Coral:
As the New York Times reports, because flood insurance is separate from and not included in standard home insurance, things are actually even worse than they appear:
In the counties whose residents were told to evacuate, just 18.5 percent of homes have coverage through the National Flood Insurance Program, according to Milliman, an actuarial firm that works with the program.
Within those counties, homes inside the government-designated floodplain, the area most exposed to flooding, 47.3 percent of homes have flood insurance, Milliman found. In areas outside the floodplain — many of which are still likely to have been damaged by rain or storm surge from Ian — only an estimated 9.4 percent of homes have flood coverage.
For the uninsured, government assistance is likely to be insufficient, to say the least:
FEMA offers some limited emergency assistance to homeowners without insurance, such as paying for temporary housing in a hotel, motel or mobile home, or making basic repairs to make a house habitable. …Aid is limited to less than $40,000 — a fraction of what it costs to rebuild.
Congress can decide to provide extra money for disaster survivors, usually by giving funding to the U.S. Department of Housing and Urban Development, which can then set up what it calls Disaster Recovery grants to states. States can then use that money to pay for rebuilding homes. …Even when Congress makes extra money available, it often takes years before that funding reaches homeowners.
Disaster survivors who lack insurance, but who can’t wait years in the hope of aid, can apply for help from the Small Business Administration, another federal agency that plays a role in disaster recovery. The agency loans to renters, homeowners, businesses and nonprofit organizations. But those loans must be repaid — what amounts to a new mortgage, which can be challenging for disaster survivors.
Most people’s home is their largest asset, and anyone who didn’t have flood insurance whose home was damaged by the storm surge just lost all their equity.
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In terms of larger implications for the climate change era, more will become clear in the coming days but these are some of the questions swirling around my head:
How many uninsured homes that were destroyed will ultimately be foreclosed on? Likely many given the scale of the damage and the low rates of flood coverage.
If that’s correct, will Fannie Mae, Freddie Mac, and the big banks continue buying mortgages from highly climate vulnerable places to then package and sell to investors as mortgage-backed securities (MBS)?
How badly will this hurt pension funds that hold MBS, and when will those funds get smart and start telling the banks they’ll only buy MBS that exclude climate vulnerable areas?
Will Fannie and Freddie be able to adjust the filters they use to determine what mortgages they buy in a way that allows them to screen out mortgages on climate vulnerable homes? Or, with the federal government’s significant influence over Fannie and Freddie, will politics stand in the way?
If nearly all the buildings in several climate vulnerable cities need to be partly or entirely rebuilt, how realistic is it those communities will ever return to what they were before Hurricane Ian?
What effect will this have on the Florida insurance market? Will those who want to rebuild their homes on the same lots definitely be able to get insurance? Will it be affordable? Will the state’s insurer-of-last-resort remain solvent in the face of the losses from this disaster? Will it have the financial strength moving forward to continue insuring any Floridian who needs it? If the answer to some of these questions is “no,” what does that mean for the Florida housing market?
The disaster of Hurricane Ian has a momentous quality to it. The storm violently upended life in a precariously-situated community that fortune had protected for decades. What happens next will be an early preview of the disruptions to come as the climate discontinuity continues to unfold.
My Work
Will owning a home lead to wealth or bankruptcy? (link)
[U]nlike overbuilding, recessions, and other things that may drive down property values temporarily, climate change is not cyclical. Once they start to decline in earnest, most climate vulnerable places won’t ever bounce back. At some point, the housing market will internalize this reality and its profound, society-altering implications. At that point the crash of housing prices in climate vulnerable places will be imminent.
Interesting Reads
The Boomtown That Shouldn’t Exist (link)
“People say, ‘Are you crazy, living in Florida with all those hurricanes?’” Tattersall told me as we drifted through a slow-speed manatee zone. “Come on. Does this feel crazy?” He recalled a recent outing with his grandchildren where they saw dolphins and stingrays, then watched the thrashing as some jacks fed on a school of mullet. “That’s what life is about, right?” I asked him whether he thought Irma would scare away the next generation of newcomers, and he scoffed. “No way,” he said.
Then he reconsidered: “Look, if we get 15 feet of storm surge, holy shit, that would take out Cape Coral.”
Tweets of the Week
Extreme Weather Watch
Creeping Authoritarianism Watch
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