Research & Commentary: Property Mitigation

Published December 1, 2009

The term “property mitigation” can refer to almost any effort or incentive to make a given building or area of land safer against the forces of nature. Policies promoting mitigation include everything from the prosaic (charging lower wind insurance premiums for houses built out of stone) to the ambitious (sweeping, invasive community-wide land-use planning and infrastructure retrofitting programs). States have experimented with a variety of approaches. California, Connecticut, Florida, Louisiana, and South Carolina are among those with specific statewide efforts intended to promote mitigation.

As of late 2009 at least a half-dozen other states were considering additional legislative and regulatory measures intended to promote property mitigation. Some measures already have attained near-national adoption. Any insurer wanting to compete for customers will necessarily offer lower premiums for better-built homes. However, little consensus exists regarding what else—if anything— state and local governments should do to encourage mitigation.

A wealth of research indicates some measures work far better than others. Most effective at making communities more resilient to disasters are risk-based insurance rates set through market mechanisms and restrictions (even outright bans) on government subsidies for development in disaster-prone areas. Means-tested assistance for homeowners, land buyouts in hazardous areas, and “strings” attached to public infrastructure programs also can be of some value. By contrast, measures such as price controls on insurance and the construction of new levees often do more harm than good.

Copious research shows that market-based approaches can be an important element in promoting mitigation. The following articles examine the positive economic and environmental effects of market-based mitigation efforts.

Analyzing the Effects of My Safe Florida Home on Florida Insurance Risk
This report from the well-known insurance modeling and forecasting firm Risk Management Solutions outlines the merits and pitfalls of Florida’s statewide means-tested mitigation program, one of the largest of its type before it was discontinued in mid-2009. RMS found the program produced good results for the state.

Cyclones and Global Warming

Author Bjørn Lomborg notes the public policy measure most effective at reducing disaster risks is to discourage people from building in areas vulnerable to disasters. That involves refraining from offering low-cost, government-subsidized disaster insurance that encourages people to move into high-risk areas.

Principles for Property Mitigation Discounts
This brief report by The Heartland Institute’s Eli Lehrer reviews some of the major research on property mitigation. The report recommends a strategy based on risk-based insurance rates, a rejection of one-size-fits-all solutions, and a recognition that even smart policies may not result in immediate insurance rate reductions.

Coastal Disaster Insurance in the Era of Global Warming: The Case for Relying on the Private Market
Although premised on sometimes-questionable assumptions about the likely consequences of global climate change, this report from the Georgetown Environmental Law and Policy Institute presents a strong environmental case for protecting the natural environment through market-based mitigation measures. The author argues against government price controls and development subsidies. Statement of Principles
This statement, signed by a diverse selection of groups from all points on the political spectrum, outlines a mitigation and risk-based strategy that environmentalists and free marketers agree on. emphasizes that policies that artificially suppress insurance rates are always a bad idea, while letting the market work makes good sense.

FLASH: Strengthening Homes and Safeguarding Families
This Web page from the Federal Alliance for Safe Homes offers a wealth of information about effective efforts to reinforce homes against natural disasters ranging from major earthquakes to small-scale hailstorms.

Natural Hazard Mitigation: Various Federal Programs Exist but Do Not Provide a Comprehensive Strategic Framework
This report from the Government Accountability Office portrays the federal government’s efforts as incrementally effective but generally disorganized and unlikely to make the country safer on their own. The report endorses mitigation in concept and reviews some of the research about its effectiveness.

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this and other topics, visit The Heartland Institute’s Web site at and PolicyBot, Heartland’s free online research database.

If you have any questions about this issue or The Heartland Institute, you may contact Eli Lehrer, director of The Heartland Institute’s Center on Risk, Regulation, and Markets, at [email protected] (202) 615-0586.