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Volcanoes and Home Ownership

Posted by on | May 29, 2018 | Comments Off

I have seen several web sites where folks looked at the neighborhoods getting devastated by lava in Hawaii and asked “why did the government let them build their homes there?”  I have three responses:

First, nature is hard to predict.  And even if it were, it tends to operate on really long cycles that are longer than most of our attention spans.  This style and location of eruption  has not happened in recent memory so folks treat it as impossible.  For a good example of this phenomenon see:  stock market.

Second, I laugh when I see the “why does the government allow homes built in dangerous areas” question.   In fact, in many cases, the government subsidizes construction of homes in dangerous areas.  Federal flood insurance is notorious for continuing to rebuild people’s homes practically for free on dangerous coasts and in known flood plains.

Third, there are private entities who do take a hand in preventing construction in dangerous areas:  mortgage lenders and insurers.  Lenders do not want a lien on an asset that is underneath 20 feet of new rock, and insurers do not want to take on expensive risks in known danger areas (particularly if there are no federal guarantees as in #2).

I actually own some land on the Big Island, a long way away on the Kohala Coast.  And in the process of getting a mortgage and insurance, we had to go through a lava risk review.  There are apparently maps of risk zones similar to flood plain maps.   Obviously, these neighborhoods that are being consumed slowly (see:  Deadpool Zamboni scene) likely cleared this hurdle.  I am not sure how.  Perhaps the developer used pull to get the maps changed.  Perhaps the people who made the maps just predicted risk incorrectly (see #1).  Perhaps lenders ignored the maps and took on the mortgages anyway despite the risks (see: 2008).

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 Volcanoes and Home Ownership

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