Houston after Harvey
The scale and enthusiasm of volunteer response to Harvey in Houston has been heartwarming and makes me proud to be a member of this community, especially in these discordant times. However, given what we’re seeing unfold, getting Houston back to normal would be a large scale operation with a need for precise planning and efficient execution.
Disaster management experts assure us that Harvey will remain an issue for Texas and especially Houston for years. The realist in me sees the truth in this, but the optimist is hopeful that advance consideration of certain details corollary to Harvey might help people plan better, take the right actions for their particular circumstance earlier and recover faster.
A few points to ponder on:
- According to CoreLogic data, only about 11% (268,000) of properties in the Houston-Sugarland-Baytown (HSB) metro are within the Special Flood Hazard Area (SFHA) and required to carry flood insurance. Another 52% or 1.2 million properties are outside the SFHA, but are in high to moderate flood risk level areas. They likely do not have flood insurance but might have some form of private insurance.
- The National Flood Insurance Program (NFIP) already owes the US Treasury $24.6 billion and has a borrowing limit of $30 billion. Hurricane Katrina and Superstorm Sandy resulted in NFIP payouts of $16.3 billion and $8.4 billion respectively, so it is fair to envision the remaining $5.4 billion borrowing room falling short of the mark.
- To complicate matters, the NFIP is scheduled to expire in about a month on Sept, 30th, so Congress will have to act fast to pass a re-authorization bill that also fixes the borrowing room issue.
- Congress would also have to consider an aid bill similar to the $50.5 billion Sandy relief bill. The size of such a bill is anyone’s guess at this point, but it probably doesn’t help that Congress is currently suffering from paralysis partisanus, or that Texas members of the house voted 23 Nays, 12 Yays and 1 abstension, while both Senators voted Nay to Sandy’s relief bill.
- In a few days on Sept. 1, Texas House Bill 1774 becomes law. For those looking to make weather related claims to their private insurance companies, this bill reduces from 18% to 10%, the penalty interest insurance companies in Texas will have to pay when sued for repaying claims slowly, or failing to pay enough. It also increases the policyholder’s detail/paperwork burden when giving notice of intent to file a lawsuit. One way to look at it is that it discourages frivolous policyholder lawsuits while another is that it reduces the disincentive to insurance companies acting in bad or sluggish faith.
- If only 20% of properties in the HSB metro area have suffered flood damage, that equates to a little less than 500,000 properties in an area slightly larger than New Jersey. The scale of labour, equipment and materials needed to execute assessment/cleanup/rebuilding in a reasonable timeframe presents interesting human and logistic challenges. Insurance adjusters are mobilizing to deal with this and I hope the Home Depots, Lowes and even construction crews in Texas and neighboring states are making similar supply arrangements. Without proper planning, a lot of people would find that even if they had the wherewithal to fix their property immediately, there are exogenous factors that could delay their efforts.
- Delays in fixing flood damage to this many properties presents a public health issue with regards to mold buildup especially given Houston’s climate. Speaking of health, I am hopeful Harvey hasn’t led to any water contamination or sewage disruption (issues with both Katrina and Sandy), and that local governments would perform the needful testing to reassure the public in the coming days/weeks.
When all is said and done, Harvey is poised to take its place as one of the most expensive storms to hit the United States. Following that, 9 of the 10 most significant flood events (by NFIP payout) would have occured since 2003 and 8 of the 10 most expensive atlantic storms to hit the US would have occured since 2004. I’d leave climate change arguments to scientists, but from an actuarial perspective, we are witnessing so called once in a lifetime weather events with uncharacteristic frequency.
Whether it is caused by climate change, population/demographic shifts, or coastal property values over time, it increases the onus on government at all levels to define their pre and post disaster related roles… especially after the cameras have moved on.
Must financing options to help those in dire need lie somewhere between spending unplanned dollars or making arbitrary, or politically motivated cuts to existing allocations? Should robust disaster relief always be contingent on special bills subject to the partisan climate of the day? Is FEMA satisfying its mandate if one event costs multiples times its annual budget? Is the NFIP in its current form viable? If so, how up to date is its coverage area relative to flood risk? How much monitoring happens at the local level to manage urban sprawl into flood plains and update building codes to this new storm/flood intensity reality? Is it really acceptable or rather unavoidable for recovery efforts to take several years while families dream of attaining equilibrium?
It appears I have more questions than answers, but pondering is a great pastime while inches of rain continue to fall, Harvey loops back towards Southeast Texas and Louisiana, and Houston looks forward to its lakes and rivers becoming highways and bayous once again.
Ossie Okeke is the founder of Vennsmith, Inc., a Houston TX based firm building a SaaS ecosystem of analytics tools critical to data-driven decision making in the energy trading enterprise.