Can We Save Coastal Communities Before It's Too Late?

One potential solution for climate change and the housing insurance crisis? Paying people to leave.

By Brooke Darrah Shuman, More Perfect Union

It’s been two years since Hurricane Ian decimated coastal Lee County in western Florida, and homeowners that have stayed or rebuilt are facing a new problem: the cost of their homeowners' insurance is now four times the national average. 

Lawmakers in Florida are weighing their options to make insurance more affordable and offering to fund home fortifications and wind mitigation for the inevitable next hurricane. But experts who study risk mitigation and climate change say the solution might be something unthinkable to many long-time residents — paying them to leave their homes and go somewhere else. 

As many as 1 in 5 Florida homeowners are going without home insurance, or “going bare,” according to a 2023 survey from the industry-affiliated trade publication Insurance Information Institute. In a year predicted to have multiple major hurricanes, hundreds of thousands of Floridians are living without vital wind coverage. One big reason is the cost — Florida has some of the highest homeowners insurance premiums in the country, with an average of $6,000 — but many residents can’t even find a carrier that will give them coverage.

The cost of homeowners insurance isn’t just a problem in Florida. Right behind it in premium costs are hurricane-prone Louisiana, Tornado Alley states like Oklahoma and Texas, and wildfire-prone states in the West, like Colorado. The major national carriers that you recognize from commercials are refusing to renew policies or dramatically increasing rates in states like California, where State Farm and Farmers Insurance have pulled back coverage and Allstate has raised rates by as much as 34%. 

As a result, more homeowners across the country are going without, or relying on state-run insurance plans, sometimes called Fair Access to Insurance Requirements (FAIR) Plans. Through these plans, the Insurance Information Institute estimates, states are collectively backing over $1 trillion in home value. 

Florida was one of the first states to expand their FAIR plan from something designed for the residents who couldn’t afford insurance, to something many in the state relied on. When Hurricane Andrew made landfall in Miami in 1992 and did $60 billion in damage, 680,000 people and businesses filed claims with their insurers. Saddled with this debt, eight of Florida’s largest insurance companies went insolvent, and the remaining carriers reacted by canceling plans and raising premiums. The state needed to act fast, and less than a year later, the legislature created a publicly-run insurance company that would later be called Citizens Property Insurance.

Abrahm Lustgarten, a journalist who wrote the book On the Move about how climate change is likely to impact migration patterns within the United States, said Citizens Property Insurance was initially developed as the insurer of last resort to protect homeowners in high-risk areas. But the program was also meant to prevent what lawmakers feared would be a mass migration out of coastal cities like Miami, one of the most dynamic and prosperous cities in the state. 

When Florida was walloped with a record hurricane season in 2004 and again in 2005, the state expanded Citizens, and soon the insurer of last resort was the largest in the state. Now, 1.2 million Floridians have public instead of private insurance. 

Lustgarten said that protecting homeowners is important, but that states are masking the risk to consumers of living in a place that will be constantly threatened by the impact of climate change. 

“Subsidizing insurance really blinds people to the actual real risk that they face,” Lustgarten said. “Both the physical risk of things like hurricanes and wildfires, but also the financial risk of their property being destroyed.” 

In October 2022, Florida experienced another record-breaking hurricane, this time on its western coast in Lee County. Hurricane Ian cost $112 billion in damage and destroyed a third of the homes in Fort Myers Beach, a coastal community. By 2023, six insurance companies in the state had gone insolvent, and premiums increased to four times higher than the national average.  

In 2022, Gov. Ron DeSantis and the Republican-controlled legislature passed a series of bills ostensibly meant to reduce rates for homeowners, but the method was questionable. The insurance industry claimed that the high rates in Florida were due to high rates of litigation; DeSantis repeated a data point pushed by insurance companies and industry-backed advocacy groups, that Florida has 8% of homeowners' claims but 80% of homeowners’ insurance lawsuits. “Are they just going to eat that litigation cost?” DeSantis asked rhetorically in a press conference. “Of course not, they’re going to pass that off in the form of higher premiums.” 

The new bills signed by DeSantis made it harder for customers to sue insurers who deny their claims. And even though state-backed insurance may be the only option for many residents who can no longer afford their insurance, the state also started “depopulating,” or shrinking, Citizens Property Insurance. The insurer of last resort was now kicking people off. 

What’s more is that instead of responding to the real risks of building on the coast, the state has worked to subsidize wealthy risk-takers who continue building on coasts in the face of climate risks. Dr. A.R. Siders, who studies climate change adaptation, said that since 2001, the majority of housing built in floodplains has been in affluent communities. These structures are typically single-family homes, and because their owners have more resources, are more likely to be built to up-to-date codes. But this doesn’t solve the risk of building in these areas.

“Even with these homes being built to the best standards to withstand hurricanes and flooding, you have to also think about what happens when the roads flood, when the septic systems fail,” Siders said.  

Siders said that an uncomfortable solution may be paid relocation, or “managed retreat,” whereby states or the Federal Emergency Management Agency (FEMA) compensate people to move. The federal government has initiated the majority of buyouts in flood-prone areas – 40,000 homes have been purchased by the FEMA since 1989 – but states have initiated their own programs as well. South Carolina launched an Office of Resilience in 2020, one of the only of its kind in a red state, to analyze risk, help relocate communities, and transform abandoned land into greenspace. Alaska is currently in the process of relocating eleven villages threatened by shoreloss and erosion. 

Siders writes that the scale of risk that climate change will bring in the next decades will require retreat at a much larger scale than we’ve previously seen and presents a number of challenges for policymakers, such as implementing retreat while preserving communities, and ensuring resettled people can actually afford lower-risk, more desirable areas.

If states don’t encourage managed retreat, that displacement may happen anyway with even more devastating results. When homeowners can’t afford insurance, or can’t afford to rebuild, they may choose to leave and cause the tax base in the area to slowly collapse, which can cause what Lustgarten calls a “spiral of decline.” 

“Suddenly you have less money for schools, you have less money for infrastructure and fixing potholes and roads and so on,” Lustgarten said. “And you start to see this negative momentum in a community.”

That’s not even the worst-case scenario, as Hurricane Ian proved. 148 people died, most of them in Fort Myers Beach and coastal Lee County, which experienced the strongest storm surge. 

Ultimately, both Lustgarten and Siders think a combination of state-funded insurance for residents (or state-funded reinsurance to protect the private market), investing in climate mitigation for cities and towns, and offering a managed retreat from wildfire and hurricane-prone areas is the best solution. 

“What is really clear is that pouring $300,000 into helping somebody rebuild a home from scratch in a place that we know is going to flood again before their kids graduate high school, that doesn't make any sense,” Lustgarten says. Siders agrees. 

“We have to give people as many options as we can,” she said. But offering subsidized insurance to affluent coastal communities, she added, “is a little like giving driver's licenses to drunk teenage boys.” 

“Maybe we should start with defensive driving courses first.”  

Want to learn more about the homeowners' insurance crisis in Florida? We spoke to two seniors who survived Hurricane Ian but are now “going bare,” or living with little to no insurance. We also dug into what exactly is happening to the hundreds of thousands of residents who have lost their coverage with Citizens Property Insurance and pushed into the private market. Now that so many national carriers have left the state or pulled back their coverage, financially risky insurance start-ups are being handed new customers in state-approved “takeouts.”