Why Disaster Resilience?
Todd M. Richardson, Associate Deputy Assistant Secretary for Policy Development. October 29, 2014 marked the second anniversary of Hurricane Sandy’s landfall. Back in May 2013, I talked about the three ingredients that were needed for a successful recovery: a planned for and prepaid recovery effort, a safety net, and local capacity and leadership. I would like to investigate the “planned for and prepaid recovery” point a little further, specifically how a combination of good local public policies and personal choices can reduce the likelihood of damage in the first place. And I want to reemphasize the importance of adequate property insurance, particularly flood insurance, which helps speed recovery.
The federal government has developed a number of concepts that have inspired important local policies. In the 1930s, the Federal Housing Administration (FHA) introduced Minimum Property Standards to ensure that the homes for which it provided mortgage insurance met a minimum standard for quality. These standards eventually formed the basis for local building codes that have largely superseded the Minimum Property Standards. (More on this interesting federal influence on local policy can be found in this 2003 PD&R publication.)
Building codes are now an essential part of the construction process and can be credited with transforming the United States from a nation with a vast number of severely substandard housing units (nearly half of homes in 1940, for example, lacked a complete plumbing system) to a country in which fewer than 2 percent of homes are classified as severely substandard. These codes surely have prevented countless fires and allowed millions of homes to survive severe weather events.
HUD is trying to apply this principle to inspire local and personal choices that will reduce property damage and deaths from inevitable future disasters. In July 2014, HUD issued a Notice of Funding Availability for nearly $1 billion for the National Disaster and Resilience Competition. The competition is intended to “support innovative resilience projects at the local level while encouraging communities to adopt policy changes and activities that plan for the impacts of extreme weather and climate change and rebuild affected areas to be better prepared for the future.”
In a related set of rulemaking born out of the Hurricane Sandy Rebuilding Task Force report, HUD has implemented a new rule that “prohibits most HUD funding … or FHA mortgage insurance for construction in Coastal High Hazard Areas.” The rule also requires “the use of preliminary flood maps and advisory base flood elevations where the Federal Emergency Agency (FEMA) has determined that existing Flood Insurance Rate Maps (FIRMs) may not be the ‘best available information’ for floodplain management purposes.”
With the $14 billion in Community Development Block Grant (CDBG) Disaster Recovery funds HUD already allocated for disaster recovery from 2011 to 2013, local grantees are actively incorporating resiliency into recovery strategies such as elevations and buyouts. The reason for this is likely due in part to additional requirements for the use of CDBG funds, such as requiring first floors be a foot above freeboard for new construction and for homes requiring substantial repair. Most resiliency efforts, however, have been locally developed and reflect the unique circumstances each community faces.
CDBG funding is also encouraging innovative thinking for big infrastructure solutions through Rebuild by Design (RBD), which began as a design competition funded by the Rockefeller Foundation on how to protect New York, New Jersey, and Connecticut from natural disasters like Hurricane Sandy and was followed by allocations of substantial CDBG funds for implementing the winning designs. Rockefeller just issued a process evaluation on RBD by the Urban Institute.
The need for this next generation of creative local resiliency is real. Between January 2011 and December 2013, there were 209 presidentially declared major disasters, with 199 in 2011 alone —including the terrible tornadoes in Alabama and Joplin, Missouri; severe flooding in Minot, North Dakota; Hurricane Irene; and Tropical Storm Lee. In 2012, two large hurricanes — Isaac and Sandy —caused substantial damage. In total, approximately two-thirds of U.S. counties had a major declared disaster during that time period. Only two states, Nevada and South Carolina, did not have any declarations.
Disasters impact millions of individuals in the U.S. each year. The Insurance Information Institute reports that from 2011 to 2013, there were 10.7 million insurance claims in the United States for damage resulting from disasters with $25 million or more in claims.
As in the case of building codes, it will take decades of smart planning to reduce our risk for future disasters. In the meantime, then, we must make sure to prepay for disaster recovery as much as possible. And there is a lot of work to be done here as well. For federally declared disasters with “Individual Assistance” declarations that make individuals eligible for FEMA assistance, FEMA’s inspectors documented damage to 732,000 homes. The most common form of damage for the homes was flooding — 65 percent of the FEMA-inspected properties had flood damage. Although most of this damage involved basement flooding, which is not covered by any flood insurance, 175,000 owner-occupied homes suffered 1 inch or more of flood damage on the first floor. Of these, just 47 percent had flood insurance. Of the 22,000 homes with flooding of 4 feet or more on the first floor, only 54 percent had flood insurance.
The federal government currently mandates that if you have a mortgage, you must have property insurance, including flood insurance if your property is located in the 100-year floodplain. It seems likely that if 60 percent of homeowners have a mortgage but only 54 percent of homeowners with severe flooding had flood insurance, then not everyone is in compliance with this requirement. As mortgage companies return to normal servicing of loans following the mortgage meltdown, it seems prudent to address this disconnect.
This is not just about enforcing laws, however; it is also making the right personal choices regarding our most important asset and, for many of us, our greatest source of wealth: our home. The Federal Reserve reported that in 2013 more than $10 trillion in household wealth was in the form of home equity. We need to protect this investment. That means we need to buy and maintain property insurance. This is particularly true for the nearly 40 percent of homeowners without a mortgage who are under no legal requirement to have property insurance.
Insurance does make a huge difference. About 5 years after Katrina hit, HUD’s Office of Policy Development and Research (PD&R) commissioned a survey of a random selection of blocks hard hit by the storm to find out what happened to those homes. Did the homeowners recover, and if not, why not? What resources did they use? The resulting report, “Housing Recovery on the Gulf Coast,” shows that even with the federal government’s significant investment in recovery after Katrina (HUD alone contributed more $20 billion), those with insurance were much more likely to have recovered after 5 years than those without insurance (75 percent and 48 percent, respectively). Regression analysis controlling for other factors shows that having insurance increases the chance of rebuilding by 37 percent.
More than 2 years have passed since Hurricane Sandy, and an unknown number of days remain until our next big disaster. Let’s make the best of this time; let’s think of both public policy and personal choice in a more resilient way. Let’s also buy enough of the right types of property insurance to recover quickly.