As a Californian, the ballot measure that limits the ability of insurance companies to increase and tailor rates to reflect risk is absurd. I hope someone funds a ballot measure to repeal the statute.
In its “best” form, it’s requiring those who have bought homes in safer areas statewide to subsidize those in more dangerous areas, which is already absurd, considering those more dangerous areas are already predominately wealthy coastal and hillside areas that can and should pay their own full cost of insurance.
My annual payment with a different insurer nearly doubled after our insurer had to drop the entire zip code purely because half of my zip code is in a high fire hazard zone, even though my property and half of zip code is rated one of the lowest fire hazard zones in the state.
At its most extreme, because of the provisions limiting risk adjustment based on and within zip codes (originally, for redlining, which I understand, but for fire risk it makes no sense considering different locations are inherently riskier), it will and has caused insurance companies to exit the state entirely, and then we’re all screwed.
I do wonder if SCOTUS will revisit this and declare the original ballot measure limiting risk an unconstitutional “taking” from those in safer locations (or insurers themselves), given my understanding is Florida has the same issues too…
jerlam 1 days ago [-]
> I hope someone funds a ballot measure to repeal the statute.
It's a ballot measure that's easily defeated as no one wants to pay more for insurance, and no one wants their property values to decrease. But no one wants to face the reality either.
It's likely that as insurance companies drop out, more Californians will find themselves on the state-sponsored FAIR insurance plan, which may already be insolvent. And the state will bankrupt itself and its citizens since no one can make any hard decisions.
hedora 22 hours ago [-]
We have FAIR. It’s not state-sponsored. It’s a state mandated syndicate of insurance companies (if you want to sell insurance you have to buy in).
Every time I interact with them, they find a new way to break the law. The big one is that they refused to pay for covered damage to our house. After fighting it for about a year, they sent us a lowball check that was less than 25% what they owed.
Our premiums are 4-5x what neighbors with more expensive, higher risk houses pay.
bradchris 1 days ago [-]
It all depends on exactly how the ballot measure is phrased. After all, Prop 19 recently passed which partially repealed Prop 13 (1970s property tax-basis freeze at point of every sale) because enough people realized that now-$20m homes by the beach paying taxes on a valuation of $100k since the 1970s is bankrupting the state. Still a lot to do to fully repeal Prop 13, but at least now the tax basis can’t be passed down across generations (yeah, California voters really did codify aristocracy into law in the 1970s. It’s mind-boggling).
That was a real case of voters voting against their individual interest (near-guaranteed higher property taxes) for their collective wellbeing (the solvency of the state)
We’re no stranger to ballot measures here, for better or worse. I think most Californians will agree with insurance reform when they realize they won’t be able to get insurance otherwise— also the fact that many people in safer areas probably would see rates decrease.
FlyingBears 1 days ago [-]
Re-pricing insurance seems to be the most effective way to reduce property values right now.
dv_dt 1 days ago [-]
It might reduce property prices, but affordability would be adversely affected. The change would require the same cash flow from buyers. Instead of the costs being on a basis of mostly on high-stability mortgage loan rates, some of the required cash flow moves to a basis of insurance rates which are annually bumped (as proposed, now with less or no regulation).
bradchris 1 days ago [-]
Affordability would be adversely affected in the short term, yes. In the long term, more housing production would be incentivized in less-risky areas. The reduced property prices to come out of this would also mean insurance rates would decrease for them proportionally— insuring for $600k is cheaper than insuring $6m, all else being equal.
On the other hand, affordability will also be adversely affected in the short and long term if nothing changes. Once the moratorium for insurance companies to leave the state is up in about 1 year, and no one can get a mortgage because no insurance providers are left. Banks will not take on the implicit roles of insurers in a no-recourse loan state.
Doing nothing is not an option. The writing is on the wall.
dv_dt 10 hours ago [-]
There are no less risky areas left to build into in the Los Angeles area. To build more you have to fight nimbys to change neighborhoods from mostly single family residences and build for density increases.
I agree that doing nothing is an increasingly unviable option
bradchris 1 days ago [-]
And of course, maybe property values in fire-prone areas should fall ! In fact, by not subsidizing them, perhaps the market would eventually restabilize these homes at saner insurance premiums to cover the reduced property value due to the risk.
A $600k home that is sure to burn within 20 years will have a much lower premium than a $6m home in the same location, after all.
hedora 22 hours ago [-]
Houses are insured for replacement value, not market value.
So, if it costs $6M to rebuild a $600K house due to construction labor shortages and permitting bullshit, you still need to insure for $6M.
It’s basically never a financially good idea to build a house in California, since market value will be below construction cost. (Otherwise, we’d have a housing boom instead of a housing shortage!)
So, decreasing the supply of buildable land (as your proposal would do) will only make housing prices go up.
Worse, all the major cities are prone to flooding and hurricane-force storms thanks to climate change, so we’d need to disallow building there too. That’s on top of earthquake risk.
otterley 21 hours ago [-]
> It’s basically never a financially good idea to build a house in California, since market value will be below construction cost.
If that were true, there would be no new construction in California. There is still plenty, although it might not be where you're looking. And much construction isn't happening where you're looking because 1/the land isn't suitable for construction, or 2/zoning rules forbid building housing in such a way that it would be profitable.
What is annoying is that this effects everyone in CA, even if you don't live in a fire prone area. They make you pay for the idiots living in these areas.
bell-cot 1 days ago [-]
...in California. Because it's bleeding gigabucks, due to insurance claims from all the recent fires around LA.
neverartful 1 days ago [-]
I'm genuinely surprised that California hasn't figured out fire risk management decades ago. The Santa Ana winds are nothing new and have been in the southern part of the state forever. I remember seeing news reports about catastrophic fires in southern California as far back as the 1970s (when I was a kid). Doesn't everyone know that strong winds (which are guaranteed to come) can make wild fires exponentially worse? No one can control the wind though.
The 3 necessary components for fire are: oxygen, fuel, and ignition source. No stopping the presence of oxygen. Ignition sources are present with lightning strikes (among other things). That leaves fuel as the thing that can be controlled. If you can't reduce the fuel load around your dwelling, it doesn't make any sense to live there. I live in a forest that has experienced a tragic wildfire in the past, so I'm in a similar boat (but without the Santa Ana winds). Keeping fuel away from my home is something that I think about a lot -- and ACT ON a lot.
I have a neighbor who does practically nothing to reduce his fuel load. It's his legal right, but I think it's foolish. He's told me he likes to keep his property "undisturbed". It sounds like there's much of the same thinking that drives policy in California.
The combined practice of: (1) put out any fire immediately, and (2) do nothing to reduce fuel load, makes for a bad combination in the long run. It would seem to me that Californians should have figured these things out decades ago and be the experts on fire risk management. What am I missing?
potato3732842 1 days ago [-]
>I'm genuinely surprised that California hasn't figured out fire risk management decades ago.
They were getting so rich so quickly it didn't matter that they had stupid and unsustainable government practices (not managing fire risk, meddling in insurance, etc).
bell-cot 1 days ago [-]
> What am I missing?
Human nature, sad to say.
knowitnone 1 days ago [-]
well, if they couldn't insure them, then don't do take their money.
bradchris 1 days ago [-]
The issue is state law forbids them from not taking their money if they operate anywhere else in the state, with certain exceptions such as historical disasters (which now the Palisades has). And the rates can’t be adjusted on a per-property basis, either. That’s why many insurers have left the state entirely.
Many properties have no willing insurer left, and have to participate in a state-funded plan (that many fear is not actually solvent). Many more properties only have one or two insurers left.
State Farm was the only insurer left in the Palisades, and my guess is after the moratorium to cancel policies is up in one year, if they can’t reflect the risk in their premiums to account for this fire, the Palisades will have no insurer left either. And then rebuilding will be impossible.
0cf8612b2e1e 1 days ago [-]
… the Palisades will have no insurer left either. And then rebuilding will be impossible.
I have no insight into how inevitable this fire was, but I do hope there is a measured approach to reconstruction. Do not rebuild in the exact same place, in the exact same way if it is destined to happen again. I previously heard a story about some guy whose house had been flooded and repaired(?) rebuilt(?) 11+ times. That entire area is clearly not fit for human habitation, stop letting them build in dangerous areas.
bradchris 1 days ago [-]
You’re not trying to convince me here, you’re trying to convince the state. I agree!
People should rebuild where they want as much as they want, so long as they’re willing to accept the financial risk to do so (I.E. higher premiums that reflect the risk… which may be 10x higher, who knows! A lot of these Palisades home owners could, and would, pay for that risk, if only the law would let an insurer charge them for that)
State law does not let that happen, and all the risk is therefore subsidized by everyone else or not offered at all. Both worse outcomes!
lesuorac 1 days ago [-]
I think the problem with leaving it all to premiums is that for things such as fires what everybody else does matters.
If everybody else has very flammable houses then the fire is going to spread and cause a ton of damage to _not houses_. The state really does need to clamp down on people using private land to cause public problems (like lack of water pressure in fire hydrants).
lesuorac 1 days ago [-]
> That entire area is clearly not fit for human habitation, stop letting them build in dangerous areas.
I'm not sure that's the correct take-away. I think you had in correct in the second sentence.
> Do not rebuild in the exact same place, in the exact same way
If your area is a fire-prone, then yes I think you should be allowed to build there. However, your house better have taken into account fire. Whether it means you can't build houses within an acre of another or it has to be all stone, idk let qualified people figure out the requirements. But eventually everywhere in the US will have been hit by a natural disaster and the rule can't be you can't re-build, it just needs to be you need to account for what is likely to happen.
As to flooding, I don't know the specifics but if instead of rebuilding the same you put the house on stilts so just the staircase floods out every couple of years I think it's fine.
floydnoel 1 days ago [-]
insurance requires it, unfortunately.
Rendered at 01:48:25 GMT+0000 (Coordinated Universal Time) with Vercel.
In its “best” form, it’s requiring those who have bought homes in safer areas statewide to subsidize those in more dangerous areas, which is already absurd, considering those more dangerous areas are already predominately wealthy coastal and hillside areas that can and should pay their own full cost of insurance.
My annual payment with a different insurer nearly doubled after our insurer had to drop the entire zip code purely because half of my zip code is in a high fire hazard zone, even though my property and half of zip code is rated one of the lowest fire hazard zones in the state.
At its most extreme, because of the provisions limiting risk adjustment based on and within zip codes (originally, for redlining, which I understand, but for fire risk it makes no sense considering different locations are inherently riskier), it will and has caused insurance companies to exit the state entirely, and then we’re all screwed.
I do wonder if SCOTUS will revisit this and declare the original ballot measure limiting risk an unconstitutional “taking” from those in safer locations (or insurers themselves), given my understanding is Florida has the same issues too…
It's a ballot measure that's easily defeated as no one wants to pay more for insurance, and no one wants their property values to decrease. But no one wants to face the reality either.
It's likely that as insurance companies drop out, more Californians will find themselves on the state-sponsored FAIR insurance plan, which may already be insolvent. And the state will bankrupt itself and its citizens since no one can make any hard decisions.
Every time I interact with them, they find a new way to break the law. The big one is that they refused to pay for covered damage to our house. After fighting it for about a year, they sent us a lowball check that was less than 25% what they owed.
Our premiums are 4-5x what neighbors with more expensive, higher risk houses pay.
That was a real case of voters voting against their individual interest (near-guaranteed higher property taxes) for their collective wellbeing (the solvency of the state)
We’re no stranger to ballot measures here, for better or worse. I think most Californians will agree with insurance reform when they realize they won’t be able to get insurance otherwise— also the fact that many people in safer areas probably would see rates decrease.
On the other hand, affordability will also be adversely affected in the short and long term if nothing changes. Once the moratorium for insurance companies to leave the state is up in about 1 year, and no one can get a mortgage because no insurance providers are left. Banks will not take on the implicit roles of insurers in a no-recourse loan state.
Doing nothing is not an option. The writing is on the wall.
I agree that doing nothing is an increasingly unviable option
A $600k home that is sure to burn within 20 years will have a much lower premium than a $6m home in the same location, after all.
So, if it costs $6M to rebuild a $600K house due to construction labor shortages and permitting bullshit, you still need to insure for $6M.
It’s basically never a financially good idea to build a house in California, since market value will be below construction cost. (Otherwise, we’d have a housing boom instead of a housing shortage!)
So, decreasing the supply of buildable land (as your proposal would do) will only make housing prices go up.
Worse, all the major cities are prone to flooding and hurricane-force storms thanks to climate change, so we’d need to disallow building there too. That’s on top of earthquake risk.
If that were true, there would be no new construction in California. There is still plenty, although it might not be where you're looking. And much construction isn't happening where you're looking because 1/the land isn't suitable for construction, or 2/zoning rules forbid building housing in such a way that it would be profitable.
https://www.cbsnews.com/news/climate-change-to-obliterate-1-...
https://firststreet.org/research-library/property-prices-in-...
The 3 necessary components for fire are: oxygen, fuel, and ignition source. No stopping the presence of oxygen. Ignition sources are present with lightning strikes (among other things). That leaves fuel as the thing that can be controlled. If you can't reduce the fuel load around your dwelling, it doesn't make any sense to live there. I live in a forest that has experienced a tragic wildfire in the past, so I'm in a similar boat (but without the Santa Ana winds). Keeping fuel away from my home is something that I think about a lot -- and ACT ON a lot.
I have a neighbor who does practically nothing to reduce his fuel load. It's his legal right, but I think it's foolish. He's told me he likes to keep his property "undisturbed". It sounds like there's much of the same thinking that drives policy in California.
The combined practice of: (1) put out any fire immediately, and (2) do nothing to reduce fuel load, makes for a bad combination in the long run. It would seem to me that Californians should have figured these things out decades ago and be the experts on fire risk management. What am I missing?
They were getting so rich so quickly it didn't matter that they had stupid and unsustainable government practices (not managing fire risk, meddling in insurance, etc).
Human nature, sad to say.
Many properties have no willing insurer left, and have to participate in a state-funded plan (that many fear is not actually solvent). Many more properties only have one or two insurers left.
State Farm was the only insurer left in the Palisades, and my guess is after the moratorium to cancel policies is up in one year, if they can’t reflect the risk in their premiums to account for this fire, the Palisades will have no insurer left either. And then rebuilding will be impossible.
People should rebuild where they want as much as they want, so long as they’re willing to accept the financial risk to do so (I.E. higher premiums that reflect the risk… which may be 10x higher, who knows! A lot of these Palisades home owners could, and would, pay for that risk, if only the law would let an insurer charge them for that)
State law does not let that happen, and all the risk is therefore subsidized by everyone else or not offered at all. Both worse outcomes!
If everybody else has very flammable houses then the fire is going to spread and cause a ton of damage to _not houses_. The state really does need to clamp down on people using private land to cause public problems (like lack of water pressure in fire hydrants).
I'm not sure that's the correct take-away. I think you had in correct in the second sentence.
> Do not rebuild in the exact same place, in the exact same way
If your area is a fire-prone, then yes I think you should be allowed to build there. However, your house better have taken into account fire. Whether it means you can't build houses within an acre of another or it has to be all stone, idk let qualified people figure out the requirements. But eventually everywhere in the US will have been hit by a natural disaster and the rule can't be you can't re-build, it just needs to be you need to account for what is likely to happen.
As to flooding, I don't know the specifics but if instead of rebuilding the same you put the house on stilts so just the staircase floods out every couple of years I think it's fine.