Chapter 8 A Tale of Two Policies: California Programs that Unintentionally Promote Development in Wildland Fire Hazard Zones

Abstract

This chapter discusses two California policies that unintentionally promote development in fire-prone areas. First is the state's Fair Access to Insurance Requirements (FAIR) Plan, a state-regulated statutory insurance industry association that provides basic insurance to property owners who are unable to obtain it in the private market. FAIR Plan was intended to be an insurer of last resort for rare cases when the private sector was unwilling to provide coverage. A functioning insurance market should discourage development in hazardous lands by charging appropriately priced premiums or denying coverage where hazards are extreme. The FAIR Plan short circuits this mechanism and subsidizes development in highly hazardous environments by forcing insurers to provide coverage at a price that is far below what the market would charge. While FAIR Plan was envisioned to fill a need for a small number of homeowners who could not otherwise obtain insurance, instead enrollment in this program has skyrocketed. The second policy relates to how the state maps very high fire hazard severity zones (VHFHSZ), statutory zones designed for designating hazardous lands in urban and suburban jurisdictions with their own fire departments. Numerous legal loopholes have given communities wide leeway to keep land within their boundaries from being designated as VHFHSZ for disclosure and fire zoning purposes, even if those lands are objectively hazardous according to the state's criteria. Of most concern with these loopholes is the fact that California's natural hazard real estate transfer disclosure standard relies on these maps, meaning that homebuyers in communities that use these loopholes may be led into a false sense of security when purchasing a home because the statutory Natural Hazard Disclosure form presented prior to transfer asserts that no known wildfire hazard exists.

Citation

Troy, A. (2007), "Chapter 8 A Tale of Two Policies: California Programs that Unintentionally Promote Development in Wildland Fire Hazard Zones", Troy, A. and Kennedy, R.G. (Ed.) Living on the Edge (Advances in the Economics of Environmental Resources, Vol. 6), Emerald Group Publishing Limited, Leeds, pp. 127-140. https://doi.org/10.1016/S1569-3740(06)06008-1