As has been pointed out ad infinitum the subsidies occur precisely because the waterfront property is valuable. The people in possession now have influence, too.

Irony appears when measures to control or change the market actually make it harder to buy that property.

At no point will a sort of "affirmative action", making it easier for "the poor" to live on a waterfront, actually work.

This is a great example of how we can tell that the government no longer represents its citizens.

If beachfront property is destroyed and it becomes too expensive to build and insure new structures, what would happen? Why the beachfronts would return to the public domain where everyone could enjoy them. We can't have that, can we?

I live on the water, and I'd gladly pay for private insurance if it was at all reasonable. My windstorm insurance for a house on a canal is over $4000 with an $18,000 deductible! My property taxes are over $7,000.

But, at least where I live, Cuban immigrants, like many of my neighbors, who came here with nothing and have worked hard can still buy a home like this, and have their little fishing boat at their dock. Most aren't quite millionaires, or maybe just above that line (a million doesn't go as far as it used to), but they're still able to live this dream.

Unless the insurance can be reasonable, it won't give the shores back to the common folk (many of whom do own these houses handed down for generations). It'll just be the super rich who can afford living on the water. All the quaint places, like the Outer Banks of NC, will become the Hamptons.

It's my understanding that public beaches have to be protected from erosion, too.

Also, there's a domino effect, where if the waterfront is eroded, then the next houses in will erode, etc. Some things need to be on the water, particularly in shipping or fishing villages and towns.

That's true, Nicole. Good point. It would be silly to only build up the public areas.

The biggest problem is that the private insurers don't want to insure these areas anymore. They got royally ripped off after hurricane Andrew here, so they pulled out or went under. Now, I believe there's only one wind insurance underwriter in FL, Citizens, which is partially or maybe fully subsidized by the state, but there's no competition.

I had a girlfriend whose home was severely damaged in Andrew, but she milked the insurance company so well that she not only built that home back, with all new fixtures, appliances, etc, but bought and renovated another one to rent out. And that happened all over south FL, which is what ruined private insurance for the rest of us.

"Unless the insurance can be reasonable"

I don't know the numbers - perhaps you can say what is reasonable?

You say your insurance is $4000/year. What are the chances of your building being wiped out by a storm? If you are directly on the shore - there is a severe hurricane how often?

Just to run some numbers - again, please correct me if these are off: Say there is a really destructive storm every 50 years - enough to destroy your house. You pay 4000/year insurance. That means that your house cannot cost more than about $200,000 to rebuild.

This ignores some fine details, but it is roughly how the calculation has to go.

I live on the water, and I'd gladly pay for private insurance if it was at all reasonable. My windstorm insurance for a house on a canal is over $4000 with an $18,000 deductible! My property taxes are over $7,000.

Yes. And? If you can't afford to live there, how is that my problem? why should I be subsidizing your standard of living with my taxes so you can have affordable insurance?

I live in Florida, too, and let me tell you that if a major hurrican buzzsaws thru the state in the next couple of years, we're going to go broke. Citizens Property, the "insurer of last resort" seems to have become an "insurer of convenience". Sadly, they don't take in enough premiums to build up enough of a reserve and reinsurance to cover catastrophic losses.

Guess who's on the hook for anything not covered by the reserve + reinsurance. Yes, that's right, the State of Florida. You and me, and your neighbors and mine.

"I live on the water, and I'd gladly pay for private insurance if it was at all reasonable. My windstorm insurance for a house on a canal is over $4000 with an $18,000 deductible! My property taxes are over $7,000."

I live in a drought-prone area. If I can't afford my (required) fire insurance, should I ask you to help out? No? Then why do you get to ask us to?

You are right on. The same applies to fire insurance in our mountain areas and other wild fire prone parts of California. If owners of mountain property had to pay the real costs of ownership, there would be far fewer homes in high risk areas.

Well, Irene blew through here yesterday, and today there are over 700,000 people without power in CT alone. I don't know how many others in other states have no power, and CL&P is saying it could be anywhere from 6 to 10 days before all power is restored. I heard that as far north as the Adirondacks, some people lost power. Burlington VT got hit really hard, too.

When I was young, people who lived on the water were the ones who lived on "the wrong side of the tracks" - it was just the fishermen and poorer people who lived on the shoreline here. Nobody helped them out when they lost everything they had due to hurricanes. We've had some horrific ones, too. But not every year. The last really bad one was Gloria in '85.

Now, all the new 3+ story homes on the water are lovely, and I'm sure the views are wonderful, but the people who live there are some of the snottiest people I have ever had the (dis)pleasure to meet. I don't care how much insurance they pay. No sympathy here. Also, our house (my parents', that is) is 3 blocks from the beach and up a hill. If their basement floods, THEY have to pay to get it pumped out. If they suffer hurricane damage, THEIR insurance company pays for it, but they've PAID for their insurance themselves.

Um, my taxes are over $6000 a year, and I have no view, no waterfront, and the house is almost a teardown. No sympathy, lovelysoul. Your insurance costs are supposed to be high- you live on a high-risk property.

My grandparents live on a lake. To hear my grandfather bitch about the cost of his flood insurance (I don't know if it's subsidized or not, but his taxes haven't risen since the 80's), you'd think that he DIDN'T get a great deal on the house after the massive San Antonio flood of '72. And nevermind that it flooded, up to the rafters on the first floor, in '98 and then again four or so years ago.

Geez - I was prepared for my cost of insurance. The cost of gas, diesel and propane have fucked up my retirement. I need to go back to work unless people like lovelysoul would help me out.

If you want to live in one of those areas and can't affort to insure the house you'd like to have, maybe you could build a smaller house so you had money left over for the insurance? Also, it seems like in most cases the houses just a mile or so inland fare much better than those directly on the beach, so why should taxpayers have to pay for you to have those nice beach front properties? Fishermen and other people who need to live and work on the coast don't have to live right on the beach.

And yes, they do spend money replinishing public beaches but they could stop doing that if they wanted to. The beaches and marshes would move around from year to year like they used to and we wouldn't be able to build nice pavillions and facilities right on the beach, but there would still be beaches somewhere along the coast for people to play on.

It is really sad to see the destruction and damaged homes and people in trouble, but I don't see how subsidizing their insurance, thereby encouraging them to rebuild in a high risk area, is helping them, or the rest of us, out in the long run.

There is such a thing as building a house on stilts. Which you should do in flood-prone areas.

Or, make taxpayers fix up your home after the flood.

I remember John Stossel did a bit on exactly this several years back on 20/20 or whatever. He pointed out how stupid it is, and yet admitted he had a house in one of those areas too and got the subsidized insurance too. Basically said, "I'd be dumb not to take advantage of it."
Ooh.. written copy of it

Oops.. guess the html gets stripped...
http://abcnews.go.com/Business/Insurance/story?id=94181

I'm going to jump in here to LS's defense, because she has some good points, and you guys have all missed something: She doesn't live on the beach. She lives on a canal. If you've spent any time in South Florida, you know that the area is shot full of canals. Her place may be well inland. For that area, it's the equivalent of living near a river. There's some risk of flooding, but not extraordinarily so. The Intercoastal Waterway does a good job of draining off storm surges, and only the few blocks between the beach and the waterway are at high risk of storm surge flooding.

Andrew was an extraordinary storm; it did substantial wind damage well inland, which is highly unusual. (From what I've read, it seems likely that it spawned a high number of tornadoes.) As LS pointed out, political and public corruption made it much more expensive to rebuild than it should have been; the city and state governments leaned on insurance companies to pay for a lot of things that weren't actually covered. Insurers not surprisingly had a cow when the bills came in so much higher than their actuaries had predicted due to these political factors, and they all pulled out of that area. We've seen the same thing happen in Louisiana after Katrina.

At some point, the various building codes that are supposed to make structures "hurricane proof" become counter-productive. Hurricane shutters were mandated even back in the '80s when I lived there. Seldom did they do much good; even if they were strong enough to stop high wind and flying debris, the structure they were attached to often couldn't carry the transferred loads. "Aha", so the government thought, "we'll just mandate that the structure be stronger!" Well, then, what started happening was structures being moved off of their foundations. The building gets destroyed anyway, and all that happens is that the codes make it more expensive to rebuild. You can't beat physics, and the more you try, the more it just makes the property more expensive and exclusive, which means more political power concentrated in the hands of people who can afford to live there.

(Incidentally, in Florida, all beachfront below a certain level is public property. So there's no debate about the proprietary of public funding for beach replenishment.)

The one other thing is: does anyone really think it makes sense to have to buy flood insurance from the federal government? Why? The usual story that gets told is "private insurance can't handle it because of the aggregated risk". Who says they can't? Insurers insure against all kinds of wide-area natural disasters, yet floods are the only one where this excuse gets invoked. Yes, insurers sometimes freak out after a mass loss event (we've seen a bit of that here after the April tornado outbreak), but eventually either they will return or competitors will move into the under-served market. Even though it's subsidized, is the federal government offering the flood insurance at the lowest practical cost? Really?

My general take on the issue: As long as they are willing to assume the risks, people can build what and where they want. It's when I have to start assuming some of their risk that I have a problem with it.

Thanks, Dave. For the record, I decided not to pay the $4000 to insure my house for windstorm because I don't have a mortgage, and it's basically indestructable (very thick poured concrete, with concrete roof). The chances of us even having $18,000 worth of hurricane damage is slim, so the deductible would never be met anyway. I'd much rather bank those premiums and pay to fix any damage if it does occur.

But if I had a mortgage, I'd have to carry windstorm, even though it's pretty silly in my case. I have no idea what the costs would be for a frame house in my area. That's one of the problems. No one is allowed just to say, "I'll take my chances and rebuild it myself if disaster strikes." Banks force you to insure.

My house is also above flood, so we probably will never have that issue either, but I did purchase flood insurance. It was only around $500 because it's probably backed by FEMA. That does seem low, but I pay plenty for the privilege of living where I do, and I'm not even beachfront.

Great piece. This should be much more known. Keep up to good work!

Travel to the country, tell me your experience, and I tell what kind of person you are....;)