Oh, please. The “but the coast is poor” argument for subsidized windstorm rates

One of the arguments I heard repeatedly at yesterday’s hearing of the Joint Interim Committee on Seacoast Territory Insurance is that the coast isn’t a bunch of rich people with fancy beach homes.  Rather, the mean income on the Texas coast is in fact lower than the mean income in the rest of Texas.

a large beach house in Galveston

An elegant home in Galveston

Let’s stipulate that this is true. On average, the Texas coast may well be poorer than the rest of Texas.  Many parts of it may have a higher proportion of minorities. But of what import should mean or median incomes be in considering the finances of the Texas Windstorm Insurance Association?  TWIA does not “means-test” in deciding who gets its subsidized insurance.   Instead, wealthy and poor alike receive the benefits of TWIA subsidies.  In fact, wealthy TWIA homeowners  receive a far larger subsidy than poor TWIA homeowners. I bet not too many of them are minorities. So while it is the case that someone with a $80,000 house in Willacy County living on a $35,000 income gets a subsidy, it’s also the case that the person with an $80,000 home in Nacogdoches living on a $30,000 income there ends up subsidizing the person with a $1.2 million house in Galveston living (possibly in Houston) on a $300,000 income.  Indeed, just to rub sand in my point, the $1.2 million Galveston estate might be a second home. Where’ s the justice in that?

A modest house in Laguna Vista

A modest house in Laguna Vista

So, when people who advance the “but the coast is poor” argument join me in advocating lowering the TWIA policy limits or placing other means-based limits on TWIA eligibility and stop saying — “but it will only save a few percent” — I’ll feel a lot better about a redistributive argument in favor of TWIA subsidies. A windstorm insurance policy that focused on poverty (or ethnicity) would look a heck of a lot different than the current system.  So, until we get to fundamental TWIA reform — one that might begin with the administratively trivial step of lowering maximum limits —  you’ll forgive me if I think justifications of anything resembling the current system based on the relative poverty of the coast  should be met with “Oh, please!”

P.S. I’d feel those folks were being yet more consistent if their arguments in favor of income and wealth redistribution weren’t curiously focused on windstorm insurance.

P.P.S. It’s those poor, by the way, who are going to be most hurt when TWIA goes insolvent or has to issue post-event assessments after a large storm.

 

Footnote: I did some research tonight on wealth in the TWIA counties.  Probably I should not have stipulated that the TWIA counties are materially poorer than the rest of the Texas, although they are no wealthier.  The population weighted mean of median household income in those counties (excluding Harris, which is only partly TWIA) is about $46,824.  For the rest of Texas, the median household income is $49,646.  So, the TWIA counties are a little poorer, but, on balance, not much.  The two exceptions, by the way are Cameron County and Willacy County, both of which are indeed quite poor.  Chambers and Galveston Counties have median incomes well above the Texas median.

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