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Playing chicken with the government on rising seas

A new report says developers have an incentive to build on the coast and hope they'll be bailed out - and points to an astounding US case study, reports Eloise Gibson.

The tiny town of Jean Lafitte, Louisiana, is engaged in an extraordinary game of chicken with United States authorities.

Despite being too small to require a traffic light, the town boasts a 1300-seat auditorium, a library, a wetlands museum, a civic centre and a baseball park, all built within a decade in a remarkable bid to make the town too valuable to flood. 

The New York Times reports that Mayor Timothy P. Kerner embarked on the multi-million dollar investment programme after being told his town of 7000 people was too small to justify the US$1 billion it might cost to extend New Orleans’ fortress-like flood defences to cover Jean Lafitte’s residents.

By sinking millions into a flood zone, the mayor hopes to make his town unsinkable.

While New Zealand’s situation is less dramatic, new research released today suggests that we, too, are encouraging a game of chicken between authorities and coastal landowners.

Otago University political theorist Lisa Ellis explored the ethics of who pays for adapting to sea level rise in a paper funded by the Deep South National Science Challenge.

The Jean Lafitte situation is “irrational choice at its most crazy,” says Ellis.

But, while it's less extreme here, she says New Zealand coastal property owners also have an incentive to keep investing in areas that may one day be in a flood zone. There’s an unspoken assumption that the government won’t let communities go under, even if they can't get private insurance. Developers can profit now, and assume that the cost of relocations or seawalls, if they are needed, will be shared among many.

The incentives to build will become even more perverse if we decide what communities to defend based mostly on the value of property at stake, she says. At the extreme: “The rich will get seawalls while the poor get moved,” says Ellis. “That doesn’t embody who we are as people.”

“I don’t think people who add value to risky areas in the hope of being bailed out are immoral, they are behaving rationally in the framework we’ve given them."

And while helping victims of an unexpected disaster reflects good Kiwi values, this time, the damage is foreseeable. “If we stick with the status quo,” says Ellis, “the way we adjust to sea level rise will exacerbate existing inequality.”

“What we don’t want is people with relative advantage to transfer their risk to the rest of us because they say ‘Our property is so valuable we need a seawall, whereas yours down the road is not so valuable’,” says Ellis.

Recent draft estimates from NIWA suggest 125,600 homes and commercial buildings worth $38 billion are potentially at risk from a large storm at anywhere between today’s sea levels and one metre of sea level rise.

Seas about a metre higher could be reached by the end of the century under higher carbon emissions scenarios, while half a metre is likely this century. Longer term, several metres of sea level rise may be in store for coastal regions, barring an abrupt change in greenhouse gas emissions.

At some point, researchers say, the odds of flooding in a big storm will be too high for private insurers to take a risk on some coastal communities.

That is when the pressure will increase on governments to step in.

Economics researchers Belinda Storey and Ilan Noy have written that house prices are likely to fall and infrastructure investments will become harder to justify as insurance retreats from neighbourhoods.

Insurers, meanwhile, hope that councils and governments will step in with protective measures, such as seawalls, planned retreat and raised floor levels, before insurers have to become the bearers of the bad news about withdrawing cover.

While policy-makers grapple with the issues of how and who will pay the costs, people are building expensive seaside homes and adding value to existing ones, in areas within one metre of current sea levels.

A seawall keeps the rising sea from properties in Thames, but for how long? Photo: Joe Dowling

Until the government announces some liability limits or rules, people building in the risk zone are only doing what is rational, says Ellis. “I don’t think people who add value to risky areas in the hope of being bailed out are immoral, they are behaving rationally in the framework we’ve given them,” she says. “I hear people complain about these high-value [buildings] going up and cleaners working three jobs (one day) having to bail them out and of course people feel that way.”

“But people have to see that everyone is acting under the same [rules].”

Ellis points to the example of the Kapiti Coast, where in 2012 the district council published contentious, early predictions of 50 and 100-year coastal erosion zones on the Land Information Memorandum (LIM) reports of about 1800 properties. Affected homeowners mounted a court challenge and got the information removed. Since the argument over the LIMs began, about a third of the affected properties have changed ownership, transferring any potential future risk to buyers.

Rather than some councils going first it would be fairer to residents around the coast if the same rules applied to everyone, says Ellis. “Right now, a Kapiti Coast home-owner who voluntary provides information [about risk from rising seas] to a potential buyer is on their own, because it is not required,” says Ellis. “It needs to come from central government. If the rules were the same for the whole country people would not feel so hard done by,” she says.

After studying the ethical issues, Ellis made three recommendations for deciding how to manage the risk and cost.

The first is for councils and the government to actively engage with people living in risky areas before making defend-or-retreat plans. Official guidance to councils already suggests this; but her main quibble with what happens currently is that decision-makers need to make a special effort to hear from renters, young people and disadvantaged people; groups that might miss out if consultation is too much focused on affected property owners, she says.

Ellis praises Hawke's Bay regional council, which recently consulted its residents over future plans for at-risk communities like Haumoana. “The Hawke's Bay process is the best-delivered process I’ve ever seen and I’ve been looking at this for years,” she says. “They did a bunch of things right, they took a long time, and before they even started to weigh things up they asked stakeholders how they were going to weigh different values, for example, how much do we care about recreation and local ecosystems?”

Ellis says people shouldn’t simply be presented with options already laid out by technical experts, or, worse, an already-favoured option that also happens to be the cheapest. “People are worried some engineer from Auckland is going to show and tell them that they have to move,” she says.

Ellis’ second recommendation is to make sure that – at some point – the government weighs up the cumulative effects of local decisions on how to respond to the flood threat. For example, money allowing, each at-risk township might individually decide to protect its own homes with seawalls. But if everyone did that, a whole area could lose its access to sandy beaches, she says. “Everyone understands that sea walls and beaches are incompatible, and everyone has an interest in the continued existence of reasonably accessible beaches … However, if each community makes its decision in an isolated fashion, uncoordinated with other communities, each will choose to protect their property while hoping that other communities choose beaches over sea walls,” says the report. “There this terrifying prospect that we end up actively losing the reasons we live by the coast. The [direction] needs to come from central government [while] making people feel like they have an active and equal say,” Ellis told Newsroom.

Ellis' final recommendation is for the government to provide certainty about who bears the cost of new, risky investment – and to bring in disincentives to build in areas that may flood.

In the United Kingdom, the government has reached a deal with insurers where people will pay into a private-public fund that covers some of the most flood-prone areas. It has set a limit on how high the flood risk can be for a home to remain covered for flood damage, meaning there is a defined point when remaining or re-building in the same place isn't possible. While the phase-in process should be gradual, says Ellis, there are aspects of the British system that New Zealand could copy. Most importantly, the residents there now have certainty, she says.

Perhaps that makes it less likely that anyone will deliberately build a pricey auditorium in a flood zone, in the hope of boosting their chance of a bail-out.

“They (the UK) drew that line and now nobody is tempted to play chicken with the public,” says Ellis.

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