Volcanoes and Home Ownership

I have seen several web sites where folks looked at the neighborhoods getting devastated by lava in Hawaii and asked "why did the government let them build their homes there?"  I have three responses:

First, nature is hard to predict.  And even if it were, it tends to operate on really long cycles that are longer than most of our attention spans.  This style and location of eruption  has not happened in recent memory so folks treat it as impossible.  For a good example of this phenomenon see:  stock market.

Second, I laugh when I see the "why does the government allow homes built in dangerous areas" question.   In fact, in many cases, the government subsidizes construction of homes in dangerous areas.  Federal flood insurance is notorious for continuing to rebuild people's homes practically for free on dangerous coasts and in known flood plains.

Third, there are private entities who do take a hand in preventing construction in dangerous areas:  mortgage lenders and insurers.  Lenders do not want a lien on an asset that is underneath 20 feet of new rock, and insurers do not want to take on expensive risks in known danger areas (particularly if there are no federal guarantees as in #2).

I actually own some land on the Big Island, a long way away on the Kohala Coast.  And in the process of getting a mortgage and insurance, we had to go through a lava risk review.  There are apparently maps of risk zones similar to flood plain maps.   Obviously, these neighborhoods that are being consumed slowly (see:  Deadpool Zamboni scene) likely cleared this hurdle.  I am not sure how.  Perhaps the developer used pull to get the maps changed.  Perhaps the people who made the maps just predicted risk incorrectly (see #1).  Perhaps lenders ignored the maps and took on the mortgages anyway despite the risks (see: 2008).


  1. Mr. Generic:

    VolcanoCafe had something on the volcano insurance rates for Leilani Estates, it was about $3000 per month, which, I think, only covered up to $350K in losses.

    From https://www.volcanocafe.org/puna-in-numbers/ :

    "One of the comments on this site gave a quote for volcano insurance for a house of 3000 USD per year. (That would be just for the event of lava overrunning your property: a bush fire started by nearby lava would be covered under fire insurance). That number suggests that the insurance company didn’t expect Leilani to last much longer than 100 years."

    I'm not sure of the actuarial math there...

  2. Baelzar:

    $3,000 per month, or per year? Makes a difference.

  3. ErikTheRed:

    Many bonus points for the Deadpool Zamboni reference...

  4. ErikTheRed:

    I wonder how much it costs to rebuild a home / neighborhood after a new lava flow. I'm presuming that Hawaii is similar to coastal California in that the value of the structure is generally a small fraction of the overall property - if you're writing a mortgage on $2M or $3M purchase of $1.7M or $2.5M of land with a $300K -$500K structure on it, then that may not be completely insane (when you consider that the down payment eats up a chunk of the difference) if the property can be reasonably rehabilitated after it gets vulcanized.

  5. Mr. Generic:

    Sorry. Per Year. The quote is the correct number.

  6. Cornell Wright:


    This map from 1992 shows the areas inundated are in zones one and 2. The zones are defined as:
    Zone !-Includes summits and rift zones of Kilauea and Mauna Loa, where vents have been repeatedly active in historical time
    Zone 2-Areas adjacent to and downslope of zone 1. Fifteen to twenty-five percent of zone 2 has been covered by lava since 1800, and 25 to 75 percent has been covered within the past 750 years. Relative hazard within zone 2 decreases gradually as one moves away from zone 1

  7. John Moore:

    A lot of land on the big island is pretty cheap - mostly in the general area of problems we are now seeing.

  8. Gerry:

    In fact, Hawaii has something called the HPIA — the Hawaii Property Insurance Association —that is funded by forcing all property insurers to contribute based on the amount of business they do in the state. The HPIA then turns around and writes subsidized lava insurance policies that enable homeowners to build in lava zones. This is just as immoral as the subsidized flood insurance that enables people to build in the Outer Banks.


  9. Luke Mullen:

    Food for thought- believe it or not, I think almost all mortgages are owned by Federal Government (Fannie & Freddie). Our California Mortgage (30yr fixed, 25% down, stellar FICO) was originated by a bank, then the mortgage was sold a few times, eventually Fannie Mae bought the mortgage. It’s still serviced by a mortgage servicing business but owned by Feds. Perhaps similar situation exists in Hawaii?

  10. cc:

    Generally lava takes a very long time to cool and in Hawaii may leave tubes under the surface such that a building might fall through. So, you still own the land and can rebuild....in 10 or 20 yrs.

  11. Aggie -:

    I wonder where the geothermal power plant was located, with reference to these hazard maps. I'm very surprised they would have partnered with a company to put such an investment in an area that would be at risk to a lava flow, especially with the directional drilling techniques they have developed in recent years. Conversely, it would make eminent sense to me to create an elevated pad, or at least an earthenwork berm system, to divert flow away from the facility and protect it from over-run. See "The Control of Nature" by John McPhee, where the city of Reykjavik was protected by quenching the lava to keep it within a channel.

  12. Alan Patton:

    Why would anybody who didn't live on the southern Big Island support such a law?

  13. asm826:

    The insurance that lets multistory private resort homes be built on large sandbars (ie. the Outer Banks of North Carolina) is subsidized by raising the insurances rates of people that live nowhere near the coast. This in an area where the 5 year possibility of a hurricane approaches 100%.

  14. ffarkle:

    Also, I understand that it takes heavy machinery to pulverize the top foot or two of lava on your site, so that new dirt can be spread around.

  15. JK Brown:

    Back in the early '90s, they were making good headway on building a spaceport at South Point. Houses are cheap by comparison.

  16. JTW:

    Free money... Real estate speculators support it because it allows them to buy land cheap, build luxury condos and homes on it, and flip them for a lot of money.
    People who want a house in a "scenic location" support it because it allows them to get land cheap, build there, and have someone else (through higher taxes and insurance on them) pick up the bill for their insurance and mortgage.
    Politicians like it because it gets them a lot of bribes (oops, lobby contributions) from the above mentioned groups.
    Banks and insurance companies like it for the same reason, they get all the subsidies.