A growing "disaster economy" is turning crises into cash

As countries continue to emit heat-trapping greenhouse gases, a warmer planet is fueling more severe hurricanes, wildfires, floods, droughts, and temperatures. Responding to — and rebuilding from — these disasters is costing Americans staggering amounts of money.

In its first decade of existence, FEMA handled 25 major disaster declarations per year on average. In the past decade, as disasters have carved larger paths through denser communities and more expensive infrastructure, the agency has had to field 63 declarations annually — a 150 percent increase.

Between 1992 and 2004, the agency’s Disaster Relief Fund, a federally appropriated pot of money for disaster response operations, averaged $3.4 billion per year. Now, annual spending is closer to $16 billion, as disasters get more intense and the number of people and amount of infrastructure in at-risk areas rises.

Disasters often require homeowners to rebuild from the ground up, but the cost of constructing a new home has nearly doubled since 1996 (after adjusting for inflation). So as extreme weather becomes more intense, rising building costs are making it even more difficult for families to recover.

Insurance premiums for American homes have risen 30 percent on average since 2020. The increase hasn’t been felt equally across the country. Homeowners in areas with the highest risk of natural disasters — along the coasts and in the middle of the country where tornados are common — have seen their premiums rise the most (controlling for all other factors). Households in some parts of Florida, for example, have seen their insurance premiums rise $4,000 or more.