BW-12 Impacts on Harris County Joshua Stuckey. Why is the Permit Guy talking about Flood Insurance?
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Transcript of BW-12 Impacts on Harris County Joshua Stuckey. Why is the Permit Guy talking about Flood Insurance?
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BW-12 Impacts on Harris CountyJoshua Stuckey
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Why is the Permit Guy talking about Flood Insurance?
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Before we get to the study…..I want to say a few thing.
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What is Insurance…And why do we buy it?
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Fundamentals – Risk Aversion
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Actuarial Rate
• Risk X Expected Loss• Bill has a 50% Chance of losing $100
dollars any given year.• Actuarial Rate = .5 X 100 = $50 Dollars
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What Do You Prefer?
100% Risk of Losing $50
OR
50% Chance of Losing $100
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What Do You Prefer?
100% Risk of Losing $20
OR
20% Chance of Losing $100
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Pooling Risk – Bill and Bob
No InsuranceBob or Bill Probability Loss/PersonNo Loss 50% 0
Loss 50% $ 100.00
Bill & Bob Two Person PoolNo Loss, No Loss 25% 0
Loss, No Loss 25% $ 50.00
No Loss, Loss 25% $ 50.00
Loss, Loss 25% $ 100.00
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Fundamentals – Law of Large Numbers
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Where Is the Pool?
In 1,000s 2001 2002 2003 2004 2005 2006 2007 2008SFHA/Non-SFHA 542 299 613 264 880 306 696 291 529 320 635 664 542 432 487 407Tenure longer than:
1 year 73% 67% 77% 78% 76% 73% 74% 73%SFHA/Non-SFHA 74% 71% 67% 67% 78% 76% 77% 80% 75% 78% 74% 72% 74% 74% 75% 70%
2 years 49% 52% 65% 65% 63% 59% 58% 48% 52% 52% 50% 66% 64% 64% 67% 62% 64% 59% 60% 58% 59%
3 years 39% 44% 57% 55% 53% 48% 37% 41% 44% 43% 57% 56% 54% 57% 53% 54% 47% 49%
4 years 33% 38% 50% 48% 44% 32% 36% 39% 38% 50% 48% 47% 49% 43% 44%
5 years 29% 33% 44% 38% 28% 31% 34% 33% 44% 42% 38% 38%
6 years 25% 30% 33% 24% 28% 30% 29% 34% 32%
7 years 22% 26% 21% 25% 26% 25%
8 years 20% 18% 22%
Source – Insurance and Behavioral Economics – Kunreuther, Pauly, McMorrow
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Subdivision A vs Subdivision BAdverse SelectionSubdivision A Subdivision B
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Fundamentals– “Houston we have a problem.”
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Okay…I’m done
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Study Background• From the Start - 1968• Debt • BW-12• Politics
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Slide By John Grounds, PE
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Study Background• From the Start - 1968• Debt • BW-12• Politics• How bad is bad• The Perfect Storm
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The Perfect Storm• IKE - 2008• BW-12 - 2012• New Coastal Maps – 20??
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The Study• We will discuss:• Background• What was the intent• Where the data was taken• Who was in the study• How it was done• Results
• Where to get a copy: Email me at [email protected]
• Who did the study:Commissioned by HCPID, managed by Norex Engineering
and executed by Quanticon LLC
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What was the intent?
• Wealth Effect (Value)• Income Effect (Available Financial Resources)
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Wealth Effect
• $200,000 Mortgage • 4.75% interest• 30 Year Term
= Monthly Payment - $1043• “Additional” Insurance Impact of $2400 yearly or
$200 monthly implies an equal home value of $161,700• Or… elsewhere without insurance I could have
purchased a home value of $238,000
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Wealth Effect
• Said another way…• Based on a $200K home at 4.75%, for every
additional $261 of cost there is a perceived economic reduction of $50K in value compared to someone with the same loan not incurring the additional cost.
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Income Effect
Simply…..
“If you give more money to the NFIP, you have less to spend elsewhere.”
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Where We Studied
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Who We Studied• 21,629 Properties• 15,489 Single Family• 1,794 Commercial• 4,346 Single Family (Non Primary Homes)
• Common Variables• Assumed Affected By BW-12 (Subsidized) • Within Map Revision Area
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How was it done?
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We hired Ph.Ds in Economic$
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Results Summary
• Immediate:• $12,249,147 reduction in annual business
volume
• Fully Realized BW-12 • $43,127,257 reduction of annual business
volume• $270,269,940 reduction of property value (lets
talk about this)
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Results – Interesting Findings
Properties in High-Risk Zones
Counts
Type TotalPrevious
MapCurrent
Map Change
All properties 159,391 26,748 31,414 4,666
Single-family homes 113,356 15,948 19,611 3,863
Commercial 8,809 1,644 1,772 128
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Results – Interesting Findings
Value of Properties Below BFE
City Total Market Value % of TotalBaytown $52,170,542 1%La Porte $76,445,166 1.90%Morgan's Point $15,533,446 20.20%Nassau Bay $193,310,684 36%Pasadena $91,663,323 1%Seabrook $335,717,249 29.40%Shoreacres $80,608,001 88.20%Taylor Lake Village $97,157,747 28.20%
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Results – Interesting Findings
Difference from BFE, By Selected City
FFE Relative to BFE
CityDatabase Properties % Under -2ft
Baytown 24,979 1.20%La Porte 14,436 3.70%Morgan's Point 354 4.50%Nassau Bay 1,591 28.20%Pasadena 40,509 0.30%Seabrook 5,195 18.20%Shoreacres 902 60.30%Taylor Lake Village 1,528 9.20%