Reforming Federal Support for Risky Development

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Released: February 2013

Related Topics: Effective Government, Infrastructure, Energy & Environment

Authors:

 
 

Introduction

Within the past decade, citizens of the United States have experienced a series of devastating natural disasters, including Hurricanes Sandy, Katrina, and Rita; the tornado outbreaks of 2011 and 2012; and an annual slew of increasingly destructive wildfires. These disasters have exerted a significant human toll, destroying homes, uprooting families, and bankrupting local businesses. The devastation caused by these disasters has increased substantially in recent years, and unfortunately the forecast does not predict a respite: most climate experts and economists expect that the United States will continue to experience escalating damages from natural hazards such as severe weather, floods, and wildfires.

As these tragedies have proven time and again, Americans are generous in times of disaster. We have seen communities come together as neighbors help one another recover and rebuild, and we have witnessed outpourings of support and charitable contributions from concerned citizens across the country. Considerable amounts of federal aid are also often sent to areas affected by natural catastrophes, and the federal government insures many Americans living in flood-prone regions through the National Flood Insurance Program (NFIP), which was created in 1968 as an agreement between the federal government and local communities, wherein the federal government makes flood insurance available to residents of communities that adopt and enforce a floodplain- management ordinance. Through such relief efforts and
programs, the federal government plays an important role in insuring losses incurred in disasters and in reducing the costs and harms of future disasters.

The increasing frequency, intensity, and costs of disasters have placed tremendous budgetary pressure on the institutions intended to avert and mitigate disasters and to provide relief to disaster victims. Because federal taxpayers often cover much of the bill for the damages of a natural disaster, individuals, developers, and local governments can face incentives to develop and redevelop areas that are at risk for natural disasters. The first step in reforming federal disaster support is for policymakers to reduce unnecessary damage caused by human occupancy of at-risk areas. We believe the federal government should continue to play a strong role providing much-needed assistance to Americans who are the victims of natural disasters, but that the federal role should also require and incentivize steps to ensure that residents and communities make decisions and undertake investments to mitigate future losses.

The federal government neither does nor should dictate where people can live, own property, or operate their businesses. The federal government can, however, rethink and reform its appropriated and nonappropriated support for development activities and postevent reconstruction to support and nurture better zoning regulations, building codes, and natural-hazards management programs, to help ensure that individuals avoid especially hazardous locations.

To make the federal government’s disaster-relief efforts more effective, from both environmental and economic perspectives, we propose a series of reforms that fall into three broad categories:

  1. Incentivize and otherwise implement higher disaster- resistant development standards for any type of federal support for new or reconstructed public and private housing, industry, and infrastructure investments.
  2. Require greater private and local cost-sharing of disaster costs.
  3. Further reform the NFIP.

Natural disasters are, by their nature, unpredictable, and this makes calculating the fiscal effects of our proposals difficult, but our conservative estimate is that our reforms would save the federal government at least $40 billion over the next ten years. In addition, these proposals will promote a safer, less- disaster-prone future, and will mitigate potential harm to those that choose to remain in areas that Mother Nature regularly visits with wildfires, earthquakes, storms, and floods.

 

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