There is little doubt that free, sensibly regulated insurance markets provide the best incentives to encourage people to prepare their properties against nature’s worst. Given limitless resources to reshape America’s built environment from scratch, simply allowing insurers to charge risk-based rates would give just about everyone a safe place to live.

But America’s built environment has evolved over a long period of time. People live in places that may not be the safest, construction standards vary over time, and sometimes threats that nobody knew about become important. The result is that some existing property occasionally needs mitigation: homes need to be retrofitted, breakwaters need to be built, and wetlands need to be preserved in their natural state. These efforts—mitigation—are of interest to insurers, environmentalists and local public policy makers.

The American Legislative Exchange Council (ALEC) has supported mitigation. ALEC model legislation provides advice on mitigation and ALEC publications provide the outlines of a conservative case for mitigation.

Recently, as an ALEC policy advisor, some legislators and others have asked me how they should decide where limited public resources for mitigation should be allocated. The quick answer is: It depends on the circumstances. But that doesn’t mean principles can’t be considered. Thus, when considering if the government has any business doing mitigation in a particular area, it makes sense for policymakers to raise at least these five questions:

One major purpose of mitigation supports should be to undo the damage of past flawed public policy. For example, if a local government decides to subsidize developers to build homes in a certain flood prone area and then gets state insurance regulators to force insurers to sell insurance to the developers at rates that don’t impact risk, then the government has some obligation to undo the damage it has done. While it’s important to raise insurance rates to risk-adjusted ones, efforts to support the construction of levees, home retrofits, and wetlands restoration also deserve consideration at the same time this is done.

Existing government programs, regulations and subsidies create reliance interests. Not all reliance interests are legitimate, but at least some are. In particular, changes in government policies shouldn’t force people to give up homes they’ve long lived in. While raising insurance rates in hazard-prone areas to risk-adjusted ones may sometimes cause hardships, it isn’t unfair to ask owners of million dollar beachfront homes to pony up much more for insurance. On the other hand, if changes to insurance rates threaten to force lower-income individuals from their homes, it’s reasonable to see if mitigation efforts can make it possible for them to stay.

Things change. While plenty of details relating to the extent of human-caused climate change are a source of controversy, no legitimate climate scientists contend that climate was entirely stable in the past or will remain stable in the future. Likewise, data can improve over time. While no scientists can predict when an earthquake will take place, it is becoming easier to predict where they will strike. Changes in actual circumstances and knowledge can sometimes result in people being stuck in places that are now known to be dangerous but weren’t known to be dangerous in the past. This can be a case for mitigation supports.

Sometimes an area can be worth mitigating, well, just because it is. The city of New Orleans, for example, has played an enormous role in the development of American music, food, and visual art and is the location of important historical events. Because large portions of it are located below sea-level in a hurricane-prone area, it’s unlikely that much of the city could ever pay truly risk-based flood and wind insurance rates unless public resources are invested in the city’s levee system and in mitigating individual properties.

Mitigation can also involve discouraging people from doing the wrong thing in the first place. Although private property owners, at the end of the day, should be able to do almost anything they want with their own land, the government should avoid encouraging construction in harmful places. For example, re-nourishing beaches that nature is trying to wash away may sometimes help preserve a few houses and, of course, the beaches themselves, but it is wasteful, promotes erosion and harms the environment. States should consider imitating the principles of the federal government’s Coastal Barrier Resources Act (CBRA)—an important environmental law signed and supported by President Ronald Reagan. Under CBRA, the federal government stays away from environmentally sensitive barrier islands and barrier beaches. Federal programs
to build roads, provide flood insurance, construct housing and do dozens of other things simply do not operate in these areas although private developers and landowners are free to do whatever they desire. States may want to consider taking this idea further and working to end all development subsidies in particularly disaster-prone areas.

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