Florida's homeowners' insurance crisis, part 4: The climate crisis and predatory over-development
June 6, 2022
Writing a daily newsletter is difficult, although one reason I started this was to challenge myself to write regularly. I did not find the time to write a letter yesterday and have decided to skip Sundays going forward.
For this 4th part of my mini-series on the homeowners' insurance crisis in Florida (see prior letters for the other parts), I want to talk about the climate crisis and predatory over-development.
Although litigiousness is another problem, the main reason Florida property insurance will continue to become scarcer and more expensive is that the climate crisis is real, and it's getting worse. The origins are from decades of heavy greenhouse gas emissions by humanity, mainly from the combustion of petroleum products such as coal, natural gas, oil, and gasoline, as well as the production of concrete. In the entire history of humanity, more than half of these human-caused emissions have occurred since 1980. The earth's atmosphere consists mainly of nitrogen and oxygen, but even a small percentage of greenhouse gases has a large impact. These gases are primarily carbon dioxide, methane, and water vapor.
These greenhouse gases cause the planet to retain extra heat, and the added moisture in the atmosphere makes storms, flooding, and hurricanes worse. The extra heat also causes ocean waters to expand and glaciers to melt, increasing the sea level. Florida has over 1,300 miles of coastline and is often hit by powerful hurricanes, which, combined with its high population (over 22 million) and extensive coastal development, makes it the most vulnerable state for climate change.
Much of the development in Florida is concentrated in the really bad areas of Florida for climate change, such as the Miami metropolitan area and the Tampa Bay region. In fact, even without climate change these are dangerous areas, and it is only accelerating due to the crisis. Over the weekend, a tropical disturbance hit South Florida, causing over 10" of rain, massive flooding, and sewage to spew out. This has contaminated waterways and closed beaches. The seasonal king tides have also worsened due to sea level rise, causing more damage each year and requiring remedies that are so enormously expensive that they will eventually lead to a need for "managed retreat"—that is, abandonment of some areas as conditions deteriorate, particularly if there is widespread destruction from a tropical storm or hurricane. These cyclones are defined by wind speed (39+ mph sustained winds or 74+, respectively), but the heaving rain, flooding, and storm surge can be of more impact, even among disturbances that don't achieve these markers.
Managed retreat is already happening, notably for a 3-mile stretch of road on Sugarloaf Key that serves about 25 homes, which, based on projected sea level rise through 2045, would cost $128 million to elevate the road 2.2'. This is the canary in the coal mine for what is to come.
Where I live, in southwest Volusia County not far from Deltona, we are on higher inland ground, less prone to flooding. Even many of our coastal areas are better positioned than South Florida, although we have low-lying areas such as in mid-town Daytona Beach, Flagler Beach to the north, and in the Deltona area, DeBary has long been prone to flooding due to geography. There are certainly areas around here that are in flood zones, though, such as near our many lakes. Home builders, buyers, and lenders have not begun to price in such risks in earnest, although insurers are starting to, which is why we are seeing such an exodus and rapidly increasing premiums.
The predatory over-development aspect I mentioned in prior letters is a big concern. We are seeing it in Volusia, and in many other areas of Florida. Builders don't have incentives to preserve/avoid developing certain areas, and most municipal and county governments, as well as our state government, are funded by developers which precludes much effort toward conservation and "smart growth" (a buzzword that I hesitate to even use, as it has become so blasé). To be fair, this is happening nationwide. Out west, development keeps occurring in the wildland–urban interface areas that are prone to explosive, deadly wildfires. This is one of many examples.
As mentioned in part 3, the state-run insurance scheme in Florida, as well as federal bailouts, create a perverse incentive or "moral hazard" to keep the predatory over-development going. If the government does not backstop these risks, you would not have so many people qualifying for mortgages as the lenders are not going to lend when they have to take such risk, if their lendees can't even get property insurance. It is currently still a common practice among local Florida governments to easily grant zoning changes and comprehensive land use plan modifications to developers, with cities and counties being governed by politicians who receive significant campaign contributions from such special interests, among both Republicans and Democrats. This needs to change, sooner rather than later.
Although private property rights are important, we are all in this together. What happens in one area affects another. Areas that never flooded before are flooding now, due to over-development depriving Florida of permeable land and the growing impacts of the climate crisis. Therefore, eventually a balance must be struck between the rights of individuals or businesses and the rights of the collective.
As a former history teacher, I find the California water wars particularly interesting. These are still going on now and growing more dire, but what I find most interesting is the pre-1914 water rights. Some individuals, businesses, and governments are grandfathered in with "senior water rights" that pre-dated the introduction of restrictions in the year 1914, but these special advantages are getting more and more contentious as others have to restrict water usage more aggressively due to drought, climate change, and increasing population. Basically, the fundamental issue is that water rights were claimed or assigned that were far in excess of the actual water available from mother nature.
In the same manner as California water rights, private property rights in Florida exceed the carrying capacity of the state. In Volusia County, we have massive new developments coming, such as the Avalon Park and nearby communities in the Ormond Beach / Daytona Beach area, as well as the Miami Corporation's Farmton development near Edgewater that they have wanted for over 60 years. But, you really can't build that much. It isn't reasonable. For Florida to remain viable and beautiful for future generations, more land has to be conserved than was ever acquired or set aside. The chickens are coming home to roost as we continue this march toward destruction. Naturally, homeowners' insurers are fleeing Florida.
I may continue this mini-series with a 5th part, later this week. I have a few good questions from readers who emailed me that I may want to look into and answer. Stay tuned!
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Notes:
On the recent tropical disturbance causing flooding and sewage backups in Miami:
https://www.cbsnews.com/news/miami-floods-dangerous-life-threatening-storm-system-florida/
On the worsening South Florida king tides:
From 2019, on the abandonment of a community on Sugarloaf Key:
https://www.nytimes.com/2019/12/04/climate/florida-keys-climate-change.html
On the moral hazard of Florida state-run property insurance:
https://cei.org/blog/beach-house-bummer-state-run-insurance-fuels-risky-coastal-development/
On homeowners' insurers pulling out of Florida:
On pre-1914 water rights in California:
https://www.nrdc.org/experts/doug-obegi/no-water-rights-ca-are-above-law-despite-sfs-claims
On the Avalon Park development in Ormond / Daytona Beach:
On the proposed Farmton development in southeast Volusia County:
Further reading: