Natural disasters provide opportunity to build even bigger homes

In the spirit of “never let a good crisis go to waste,” homeowners in five areas that experienced natural disasters in recent years ended up with larger homes:

To estimate the mean change in real estate, Lazarus and his team gathered satellite data, from sources like Google Earth, of five hurricane-prone places: Mantoloking, New Jersey; Hatteras and Frisco, North Carolina; Santa Rosa Island, Florida; Dauphin Island, Alabama; and Bolivar, Texas. They looked at images taken before the most recent hurricane and compared them to satellite data gathered post-recovery.

Even with conservative study inclusion criteria (any structure that experienced a 15 percent or smaller change in size was excluded, Lazarus says, because with “satellite imagery, there’s tilt, the sun can glare in places, and you have to be careful with what you’re digitizing”), the results were striking. The study found that rebuilds were between 19 and 50 percent larger than the original structure. New construction increased in mean size between 14 percent and 55 percent compared to the buildings that stood before a given storm…

“This is where the moral hazard comes in: the risk of some choice you make is not entirely yours, it’s distributed to other people,” he says. In the United States, for example, taxpayers fund the National Flood Insurance Program, a financially-beleaguered federal entity that insures many of these enormous beach constructions. As a result, every taxpayer is inadvertently “supporting development in risky places,” he says.

There’s also concern that such disasters may be displacing poor and middle-class homeowners, allowing developers to swoop in after a catastrophe and build a wealthy renter or buyer’s dream McMansion from the ashes. In a blog post accompanying the study, Lazarus cited several such events, documented by newspapers around the country. “The one that really continues to hold my attention is the New York Times piece on the Jersey shore,” he says, citing a story about developers who were able to buy bigger lots at depressed prices, permanently changing the community.

I can see why this seems odd. An argument can be made that homes constructed in disaster-prone areas should be more modest. Perhaps homes should not be rebuilt in these locations at all. Building even bigger homes may appear to be throwing caution to the wind.

At the same time, the trend in the United States for a long time has been toward bigger and bigger homes. Regardless of the reason a home is destroyed, would a majority of Americans respond by building a larger home? And this might be especially true in this areas near the beach where homes and land can have a high value (even if there is a threat of disasters).

If a bigger home equals a better home for many Americans, it will be difficult to argue otherwise, regardless of the situation.

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