Article from Reason by Christian Britschgi.

Lost in the mix, however, is the way that existing development restrictions in fire-safe regions have encouraged home-building in high-risk areas, while perverse insurance regulations have shielded property owners from the true costs of living there.

“Ultimately there are people living in high-risk zones who cannot afford to bear the full risk of the places they’ve chosen to live,” says R.J. Lehmann, an insurance policy expert at R Street Institute. “They didn’t have accurate information through market signals.”

A lot of these problems, he says, can be traced back to a 1988 state ballot measure, Prop. 103, that created an elected insurance commissioner who must approve rate increases proposed by insurance companies.

Loosening development restrictions in cities would, the thinking goes, lead to more home construction and therefore lower housing costs. That would, in turn, give people who are priced out of fire-prone areas (following insurance reform) safe and affordable places to move to.

Read the entire article at Reason.