the "Everhouse" and the market for hurricane risk

OK, back to my files for an interesting policy question, a bit of a puzzle for economists and the market, a weather-related issue from the Fall, and a reference to my sister-in-law's hometown...

Here's Jake Halpern on the occasion of June 1, 2008 in the WSJ-- when tens of thousands who lost their homes in Katrina and the Flood of New Orleans, and had been living in federally-owned trailers, were forced to move out...

These folks are not going to have an easy time of it, because affordable housing in the Gulf Coast region is scarce. The problem has persisted despite billions in government aid – and the efforts of large private developers – because of a shortage of skilled laborers and sky-high insurance rates.

Yet now there is hope, in the person of John Sawyer. Not only does this 64-year-old Bostonian believe he can build houses people can afford to buy and insure; he says they will withstand the next big storm. And, by the way, he intends to makes a tidy profit.

Mr. Sawyer, who has built golf course communities and retirement homes in New England, has teamed up with Harold McKenna – founder of Boston Mortgage – to form Environmental Building Systems. Their goal: to build 1,500 "Everhouses" (designed by architect Steve Mackenzie) each year to fit the unique needs of the Gulf Coast.

Everhouse

Mr. Sawyer says the first batch of 20 homes will be built this summer in Pascagoula, Miss. Everhouses, he says, are easy to build, friendly to the environment, cheap to insure, and able to withstand hurricane-force winds.

The dwellings will arrive in the form of kits that can be assembled in as little as 14 days. With walls of reinforced concrete, there isn't much wood, and so mold won't pose a major problem if the houses are ever flooded. They can "take a bath" as the locals say. Everhouses also cost $68 a square foot, less than half the going rate for affordable housing in New Orleans.

The upshot of the house's durability and cost is that it's easy to insure....