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Welfare for the Rich

Floridians should be outraged and policymakers should be too.  Government-run Citizens insurance, now the biggest insurer in Florida, is Robin Hood in reverse.  Citizens provides artificially low insurance prices to homeowners along the hurricane-prone coast, and requires other homeowners to pick up the cost of the subsidy.  This means that coastal homeowners, including wealthier homeowners and those living out of the state or country, benefit from lower insurance prices, while average Floridians pay the difference with higher insurance prices, assessments and hurricane taxes, including Floridians who do not even own a home.

While there are exceptions, in general, incomes increase as you move south and toward the coast.  Take, for example, Miami’s Fisher Island.  According to data from the U.S. Census, it would take the income of nearly 20 households in Gainesville to equal the income of the median household on the Island.  Yet, homeowners in Fishers Island can qualify for subsidized homeowners insurance as long as the value of the home is less than one million dollars.  This means that a homeowner in Gainesville will pay their full insurance costs plus something extra to help often well-to-do consumers on the coast.

What’s worse is that homeowners who live out of the state and out of the country get benefits too, and other Floridians pay more as a result.  In Fishers Island, for example, over sixty percent of the homes are not owner-occupied, not renter-occupied, not for sale and not for rent – they are mostly vacant homes, used as vacation and investment properties.  According to data from the National Association of Realtors, these second homeowners typically have higher income than other consumers, and they get subsidized.  While they have higher incomes, they often buy lower valued homes, well under one million dollars.

Because about half of second homebuyers live over 300 miles away and 40% live more than 500 miles away, many of these second homebuyers do not even live in the state.  In fact, data from the National Association of Realtors show the influx into Florida of wealthy foreign homebuyers.  Specifically, Florida accounts for nearly one-third of foreign-owned homes in the U.S. with 80% of foreign buyers paying cash for their second home.  These wealthy homebuyers pay cash for their property, but can’t pay the real cost of insurance?

When you put the data together, one thing is clear – Citizens runs a welfare scheme that benefits the rich, including vacation homeowners who do not live in Florida.

Look.  Insurance in Florida is not cheap.  When policymakers decided that homeowners along the hurricane-exposed coast needed help, they erred by making other consumers pay for it.  Now policymakers need to have the courage to fix this scheme by limiting Welfare for the Rich and second homeowners, as well as encouraging insurers back into the market.

Steve Pociask is president of the American Consumer Institute Center for Citizen Research, a nonprofit educational and research institute.  For more information, visit