I would append to these explanations, "moral hazard". Many of the people rebuilding in these areas are being subsidized by the rest of us, particularly people with access to reimbursement from the national flood insurance program.
I truly feel bad for the people who lost their homes, it's awful. But it shouldn't be the tax payer who picks up the tab. If insurance is so prohibitively expensive you can no longer afford to build there, then so be it - you can't afford to live there after all.
That’s fine. If it’s not possible to buy insurance for a particular house at a price that you can afford, don’t live in that house. The state’s other taxpayers shouldn’t be assuming your financial risk.
Say the city has invested in infrastructure, has a thriving industry etc. That typically isn't "portable". To get a return on that investment they need residents.
The residents naturally want things like insurance etc. It's high though - a barrier to entry. The city runs the numbers and decides that a resident is a net win even after insurance subsidies are applied.
Now granted, the calculation isn't that simple, and usually these things come with much hand-waving. But its not as simple as "other tax payers assuming the risk".
It seems like sunk cost fallacy is at play here. When is it time to stop throwing good money after bad, and start thinking about a managed retreat?
Private insurance doesn't have the same upside
I don't know if I agree with this but am answering your question fwiw
That said, there are some cities that have a local income tax so, in theory, one can imagine a scenario where, as a development project, some local government convinces high-income artisans or work-from-home workers to move into extremely cheap housing by subsidizing their disaster (flood, fire, earthquake, etc.) insurance. This is again likely a paradox: if high-income people wanted to live there, the housing wouldn't be cheap anymore.
Keep in mind that for many expensive homes, much of the expense is in the location, and not the home itself. It doesn't cost the market value of the house to rebuild it on the same spot. It's also not free, and in mass disasters it can be more because of shortages, but it's still less, often significantly so, than the market value.
Part of that is easily attributable to depreciation of the structure but another large portion is the large increase in skilled labor costs in the last couple years.
Rebuilding is exactly what paying taxes are for. We've been giving too much of it to corporate interests, why not give some to the citizens? What are we, nodes of the Matrix, supplying the machine with labor for nothing but an illusion of a decent life?
Not enough of a worst-case cost to cause a run on the banks (or a collapse in property prices), but enough to get people to start using the brains they were born with.
But I expect there comes a point where insurance companies say "enough is enough".
Perhaps federal and state money will start to pay out, but the land gets bought as well.
For example, I don't pay for collision protection on my car. I can afford losing the car. Over time I've saved far more in insurance premiums than the cost replacing the car.
The same goes for insurance for appliances, etc.
If everyone who said screw it got unlucky the way the internet likes to make it seem then insurance as a business model simply wouldn't work at the price points it does.
https://finance.yahoo.com/news/charlie-munger-said-warren-bu...
I lease EVs with the federal tax credit and invest what I’d otherwise spend buying cash. You need to look very closely at the numbers for your own situations but it’s been a “better” deal than buying cash the past few cycles.
Sure, you could also just buy a decade-old Honda used, but then you get to drive a used decade-old Honda. It’s like suggesting that camping is cheaper than a hotel or that luxury hotels provide no additional value beyond budget hotels.
On the other hand, used Range Rovers depreciate so drastically that you can buy one less than a decade old for under $10k, just make sure to check insurance and maintenance costs and actually have it inspected before buying. The air suspension in particular is why you see so many “dropped” examples for cheap.
I pay about 1 000 NOK (about 100 USD) per month to ensure my 2015 Tesla S here in Norway. It would take over forty years to get back the purchase price by not insuring it all and more like eighty if I were to merely drop the collision protection. And that's not even considering that they have paid out about 60 kNOK (6 kUSD) in claims for collision damage so far for this car (no other vehicle involved).