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Study faults California for building homes in wildfire areas

EconomyJun 10, 2021 06:20PM ET
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© Reuters. FILE PHOTO: Firefighters battle the wind driven wildfire in Carlsbad, California, U.S., January 20, 2021. REUTERS/Mike Blake

(Reuters) - California risks an escalating spiral of wildfire catastrophes and rising housing costs unless it completely revamps how it rebuilds after fires and finds ways to discourage building in high-risk areas, according to a study released on Thursday.

The study by the University of California Berkeley Center for Community Innovation and the research institute Next 10 also warned of an impending insurance crisis unless laws are changed.

Building in already established communities that are largely protected from wildfires is more expensive, so developers continue to encroach on dry, hilly terrain that is more affordable. Meanwhile, communities that have been burned out in past fires tend to rebuild on the spot where homes were leveled.

That avoids the short-term expense of retreating from danger zones or redesigning housing into clusters surrounded by more easily defended territory, but in the long term the costs are far greater, the study said.

"The cost (of the status quo) just keeps adding up," said Robert Olshansky, one of the report's authors.

Insurance payouts for fire claims averaged $100 million per year from 1964 to 1990 but have skyrocketed to a total of some $26 billion for 2017 and 2018 alone, the study's researchers found.

Among the policy prescriptions are adding a property surtax in dangerous areas and insurance regulation that would enable pricing to discourage building in danger zones, Olshansky said.

"What we are proposing is to think about this more broadly," Olshansky said in a telephone interview. "There is a lot more political will for this than there was two or three years ago."

But at a time when one in 12 California homes is located in an area at high risk for wildfire, state policies restrict insurers' ability to adjust rates based on risk or drop customers in fire-prone areas, the study said.

Likewise property tax law impedes the state from charging a surtax in high-risk areas that could pay for proactive policies. A 0.25 percent assessment on properties in high-risk zones could generate more than $1.8 billion, the study said.

Study faults California for building homes in wildfire areas
 

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