The Biden administration is moving ahead with a plan to substantially raise flood insurance rates for many coastal homeowners beginning on Oct. 1 — an effort to better reflect the cost of growing flood risks.
Linda Shi is an urban environmental planner and assistant professor in city and regional planning at Cornell University. Shi studies how cities adapt to climate change and her research shows that municipalities too often depend on property tax revenue from at-risk, coastal developments. Shi says that FEMA’s plans to raise insurance premiums will be very painful for households and local governments, but that it represents an opportunity to rethink housing policies and land use development practices.
“The connection between infrastructure planning and land use governance of the United States has never been strong. Any corrective measure now – including FEMA's periodic efforts to adopt actuarial insurance rates – is bound to be painful for households, communities, and municipalities.
“Research finds that increases in insurance premiums decrease property values – one study estimated that an average annual premium increase of $3,500 in Virginia Beach would decrease property values by $64,000. Property devaluation in turn leads to lost property taxes. Our research suggests over 100 municipalities (out of 918) in Florida could lose over a quarter of their municipal revenues if properties within six feet of sea level rise become devalued (whether by rising tides or insurance).
“Rising insurance premiums therefore imperil not only households but also local governments. This is why local and state officials, even those in favor of climate action, lobby vocally against the imposition of actuarial insurance rates. However, as painful as insurance realignment is, FEMA's latest efforts also present an opportunity to reconsider housing policies and land use development practices that contribute to housing mobility for lower-income groups, urban infill, regional revenue sharing and equitable development, as well as coastal restoration.
“The question isn't whether to raise insurance premiums, but how to pair such increases with complementary policies to produce an equitable or even aspirational future.”