Harvey's Aftermath


The tropical storm that hit Houston the Texas and Louisiana Gulf Coasts last week was a devastating blow to this city and region.  Luckily, all of New Capital’s systems, office, and personnel were unaffected.  We have been in contact with all affected clients and can report that a small minority of our Houston clients experienced damage.  But on the whole, the damage to the city and its citizens’ homes and psyches has been widespread and catastrophic.  The images of our fellow citizens’ traumas and suffering are indelible and our hearts are heavy.  May they receive the resources, compassion, comfort, and peace that they need to rebuild their lives and overcome their suffering.  If we can help you plan any charitable giving around this event, please let us know.  We have contacts at several organizations that will be focused on recovery.  Also, we are offering financial advisory assistance to those who need to speak with someone in the wake of this disaster – if you feel we can help someone, please let us know and we will be pleased to help them if we can.

As the water recedes, the damage is assessed, and the remediation begins, people are beginning to talk about what it means.


In 1900, a hurricane arrived unannounced at night and drowned and destroyed the city of Galveston, which had been built on a barrier island situated right in the Gulf of Mexico; this storm remains the deadliest in US history with over 6000 fatalities.  And while the city, at that time the largest in Texas, would rebuild, including a massive seawall to block tidal surges, it would never again regain its size and stature – how many would risk life, limb, and property for the chance to live on an island paradise?  From that point on, Houston, Galveston’s small neighbor inland at the northern shore of Galveston Bay, would grow into a colossal metropolis of over six million people spreading out over a vast coastal prairie.  Houston represented the high ground in comparison to a barrier island in the gulf.

Over a century later, it is no longer so easy to view Houston and its vast environs as high ground.  Harvey dropped torrential rains for days straight, and many parts of Houston flooded.  Perhaps no city could endure such rain without flooding.  But not all cities are at risk of such rain, since not all cities lie in the path of tropical storms. Houston lies about 35 feet above sea level, higher than Miami, Boston, New York and many other coastal cities.  But the vast amount of rain that tropical storms deliver require ample drainage, and Houston’s network of bayous can only shed copious water so fast.  Buffalo Bayou itself courses through the heart of Houston’s most affluent neighborhoods, its downtown, and its industrial core east side, and for that reason retention reservoirs and dams were built at Barker-Addicks to control Buffalo Bayou’s flow.  Other bayous, including Braes, have been altered over many years to enhance flow rates, and yet still are overmatched in many storms.  Billions have been spent on flood control projects in Houston, and yet Harvey overwhelmed many if not most of them.  The storm destroyed property in areas immediately proximate to bayous (for example, Meyerland); areas secondarily proximate to bayous (for example, Bellaire); areas proximate to man-made reservoirs (for example, Lake Conroe); and more.  Perhaps most dismaying is the intentional (and ongoing) dam release flooding of areas around the Barker-Addicks reservoirs, in order to save the core of the city.  Maps of the destruction, at least to these eyes, show an area astonishingly equal to perhaps 50% of Houston’s land area to be affected.

Most of the damage, estimated at 80%, appears not to be covered by the National Flood Insurance Program, and could well result in total financial ruination of those impacted if the federal government does not massively inject capital into the region, as it is currently expected to do (as of today $8 billion has been approved as an initial payment).  Even with assistance, it is unlikely that homeowners will be made whole.  Given the precarious financial state that many Americans live in, with little to nothing in savings except for their home equity, even modest shortfalls in financial remediation could prove to be ruinous.  The financial stress on many of Houston’s inhabitants, many of them ill-conditioned to absorb this blow, could be extreme.  Of New Capital’s approximately 60 Houston-based clients, approximately 5 experienced flooding in their homes.  We are very sorry for these clients, but are also relieved more were not impacted.

Houston has always been built on a resilient and can-do spirit.  Many believe that this will be enough to bring the city back.  My cousin in his mid-70’s emails me that “like the htowners b-4 us...when going gets tough...the tough get going.”  And maybe that is the case here, time will tell.  But I cannot help but conclude that Harvey represents a “watershed” moment that will forever alter Houston’s course.  And that may not be a bad thing.

Past disasters have altered the course of many cities, including the Great Chicago fire of 1871, the San Francisco earthquake of 1906, and the Galveston hurricane of 1900.  Many other cities have been destroyed by the insanity of war, in which humans intentionally destroy their own capital and those of other humans.  These cities rebuilt in the wake of these historical calamities, and re-built more mindful of geography and building methods.  Chicago changed is construction methods to be far more fire resistant.  San Francisco invented construction more durable to earthquakes.  Galveston constructed a sea wall.  Both Chicago and San Francisco have gone on to become global cities.  Galveston, which had grand ambitions in 1900 even as the murderous hurricane churned up in the gulf, was never the same city again, and was relegated to a moderately sized port and recreation community.

The Questions We Now Face

Just as these cities once did, Houston now faces major questions:

  • “Out or Up?” – Houston has been built to sprawl over as wide a land mass as possible, with single family homeownership preferred. Given the broad rainfall and flooding of Harvey, should Houston build up instead? Inside the 610 Loop, that trend had already begun years ago.

  • “Regulated or Not?” – Houston has been built with the slimmest of construction regulations. Given the vast destruction of the housing stock most affected in low lying areas, and given the enormous amount of concrete that has been placed over the coastal prairie, should stricter regulation now be both accepted and embraced?

  • “Big or Right?” – Houston has always wanted to be big, and its bigness was severely punished by Harvey. Should Houston seek to be right-sized, whatever that means, allowing just the number of people who comfortably fit in flood free areas?

  • Growing or Being? - Houston has always gone for growth, it is in the very conception of the city. Hard as it may be to imagine, should Houston instead focus on moderate growth, similar to a city like Minneapolis? Is there anything wrong with that?

  • Green or Brown? Houston has been an industrial city, and a port city. Should it instead focus on green development, taking advantage of its year round warm climate, abundant rainfall, and tree-friendly environment?

  • Global or Local? Houston has become a global city with its vast immigration, and that has added extraordinary depth of character in the past two decades. Should the city continue to welcome immigrants with the same open arms?

My Opinion

If it was me, I would pick: Up, Regulated, Right, Being, Green, and Global.  Houston has traditionally been almost completely the opposite: Out, Not Regulated, Big, Growing, and Brown (it has, however, always been a globally interested city) .  In other words, in my judgment, the Houston Storm of 2017 is not just a storm, but the event that may cause Houston to do a 180.


Like manufacturing plants seeking “six sigma” quality, Houston should adopt a goal and a slogan: “No one floods” – and it should take all reasonable steps to reach that goal.  If a structure or area cannot be reasonably guaranteed to not flood under Harvey-like conditions, then it should be evaluated for long term planning overhaul.  Capital should not flow to structures and areas where the returns are likely to be bitter.  The City and County should do an about face and adopt some of the strictest development ordinances in the United States.  Owners in areas that consistently flood should be made reasonably whole by our citizens, and the land should be returned to its natural state.  Bayous should not be settled but should instead be re-developed as greenbelt jewels that draw people from all over the world to hike, bike, and explore.  Plants and trees grow very well here, and our urban forest should be re-vitalized and urban gardens developed.  Our urban center should be built up with attractive, energy efficient high rises, just as is occurring in so many other cities in the world.  Our freeways in the core should, wherever possible, be depressed below grade to be able to do double duty as flood channels during storms, and should carry aesthetically attractive bridges such as those between Hazard and Montrose over US 69.  Billboards should be more restricted, and driving in Houston should become a visual delight, not a depressing ad.  Go-go growth should give way to beautification and right-sizing.

Houstonians may reject these ideas.  But to do so is to jeopardize the long term.  Houston does not have a flood control problem.  It has a zoning problem, that is now perfectly clear.  Storms like Harvey cannot be controlled, they can only be avoided.  Our family had a fairly uneventful storm.  We took swims and hot tubs outdoors both during and between the rain, walks in our neighborhood, and watched family movies together.  We were able to do so only because our home did not come even close to flooding.  Many more Houstonians should have that benefit than just my family.

Houston should be a place where its residents don’t fear and flee from nature’s largest storms, but instead calmly wait for them, confident that we can cakewalk through even an 800 year flood.  Houston and Texas are utterly dependent on tropical moisture from the Gulf of Mexico.  Without it, our region would be a desert.  We got a taste of that in 2011, when no tropical moisture reached Texas between February and October.  With no rain at all, Texas literally burned up; the town of Bastrop east of Austin exploded in flames and a 10,000 year old pine forest was completely destroyed.  At my ranch between Houston and Austin, wildlife was silent, the ground baked, and old growth trees died.  In contrast, on my visit right after Harvey, this land was green and lush, ponds were full, and wildflowers bloomed.  Tropical moisture gives far more life to Texas than it takes, and we should be grateful for it, and respect it.

Expressing that respect by adjusting our settlement habits will take years, decades, even generations, to bring about.  Whether Houston has the vision, energy, and capital to bring about these changes is completely unknown.  There will be many “business as usual” arguments by those both with and without special interests, and they may well prevail.  The good news is that these changes have already begun with things like the Bayou Greenways initiative, renovation of old and creation of new parks, roadside tree plantings, remediation of Galveston Bay, and the increasing high-rise development in our urban core.  There are non-profit organizations, such as Trees for Houston and Galveston Bay Foundation that have spent years honing their ideas, and they should now be put in the highest leadership roles, and we should listen to them.  The city and its citizens should now throw their full weight behind the concepts and vision represented in these early prototype efforts.  They were the future, and now must be the present as well.

The Storm’s Reach

Harvey raises national and global questions as well.

It is difficult to argue that go it alone rugged individualism is the sole acceptable sociology in the face of this communal tragedy, and happily Houstonians of all political persuasions have not done so but have instead everywhere provided care and support. 

It is hard to argue for the elimination of FEMA or of the government itself when it is so clearly needed in the face of communal distress. 

It is hard to argue that climate change is either a “hoax” or has no real world effects when Harvey’s rainfall shatters records, and may some day be eclipsed by even worse and more frequent storms. 

It is hard to argue that low income skilled immigrants should be banned or expelled, rather than at the very least offered valid work permits, when they are needed every day to do jobs in the Houston region, especially now. 

It is hard to argue that the many industrial and petrochemical plants should not be highly regulated when they are vulnerable to almost immediate destruction. 

It is hard to argue that residents near these facilities do not deserve measures of protection when they can be exposed to contamination over both short and long term. 

It is difficult to argue that victims of Hurricane Sandy should be denied federal financial assistance but the victims of Hurricane Harvey should get all they need. 

And yet these and other similar arguments have been made, and when the press leaves Houston in a few weeks, will likely be made again.  Hopefully, such arguments will now be less accepted. 

The subject of climate change, especially, should no longer be controversial.  The scientific evidence against a human induced changing climate was already tenuous at best before Harvey.  Those tenuous arguments are in the process of being completely demolished both by authoritative empirical scientific research and now by reality.  The United States now needs to respond with leadership and innovation to this challenge, and yet the current government shows no inclination whatsoever to accept reality, much less address it.

Houston itself faces difficult decisions with regard to its carbon based economy.  Vehicular transportation, which constitutes the vast majority of use for petroleum, is undergoing its most dramatic period of change since the advent of the automobile over a century ago.  The confluence of electric cars, self driving cars, and ride sharing will dramatically alter the demand for internal combustion cars, and with it, gas and oil.  Though Houston’s economy is far more diversified than it was during the devastating depression it suffered in the 1980’s, it is still highly reliant on the fossil fuels industry.  How Houston responds to changes in the energy business will largely determine its economic future, and to date, the record is mixed.  Houston will never challenge Austin’s pre-eminence in information technology, which has been decades in the making.  Dallas has developed a highly diversified economy, and with Harvey, the Dallas-Fort Worth area will logically be able to make the case that it alone is the Texas mega-city that can both attract business and protect its employees’ investments in their own homes.  San Antonio may also benefit from any reluctance of businesses to locate in Houston given the evident risks to property here.  Houston’s vital port and medical industry are critical assets, and yet it is difficult to envision Houston’s future without a strong energy industry.

A few days ago, Amazon announced it is seeking to build a second headquarters.  It states requirements including access to a modern (young, technologically advanced) labor pool, high quality of life, access to quality education, and ample public transportation.  It may be that Houston can offer many of these things, and yet initial reactions in the press almost completely discount the possibility that Houston might even be strongly in the running. Houston’s decades-long aversion to planning its future may now hinder it in the sweepstakes to attract the nation’s most prominent company.  Time will tell. In many ways, the future of Houston now lies in the hands of the federal government, because no other entity can make good on $180 billion in losses and counting. 

The City’s and County’s coffers are already stretched to breaking by police and fire, schools, and infrastructure, and residents show no inclination to pay more in property taxes than those that already annually outrage them.  The State will provide no assistance given its longstanding aversion to taxes.  That leaves the Federal government, currently in the control of a party that is, at least in its rhetoric, inveterately opposed to government spending and taxation, holding the bag to, literally, bail Houston out.  It is a situation that could be financially precarious for Houston for some time to come.  While the Federal wallet is opening in these early days after the storm, it is not hard to envision it closing in the months ahead as life gets back to “normal.”

Financial Implications

The financial implications for individual homeowners are immediate and potentially dismal.  Home equity, often thought to be an inviolable good in the United States, has been destroyed in great measure by Harvey.  How many Houstonians now wish they had been apartment renters, and instead invested their equity in a diversified global liquid portfolio?  The lesson of home equity volatility was brought home in the financial crisis, and is now amplified again.  No one should think that home equity does not bear risk.  As the owner of two homes in Houston and a ranch halfway to Austin, the approach of Harvey gave me great anxiety.  I count myself as one of the luckiest in Houston, and I am cognizant that it may not always be so.

The National Flood Insurance Program (NFIP) faces many questions in Harvey’s wake, as it has for a long time.  With a $25 billion debt and growing, many are waking up to the fact that the program is not run to make a profit, but instead has political incentives and pressures to underwrite insurance for properties that are highly likely to flood, and many of which have flooded multiple times in the past.  The program, therefore, creates “moral hazard”, inducing and subsidizing people to settle in areas that may best be left unsettled.

For those who have federal flood insurance, the road to collecting it can be long and difficult, requiring copious documentation, and above all delivering the funds to mortgage banks that have control over disbursements pending documentation.  This painful process will force homeowners to pay out of their own pockets, and then seek reimbursement.  This will not be a pretty sight at all, as already financially stressed Houstonians grow even more stressed by raiding their savings to pay to renovate.

And there are the many, estimated at 80% of Houston’s residents, who have no flood insurance and who flooded.  The potential for financial distress and ruin for these residents is amplified even more.

Aid, therefore is vital, and while the signs are good, they are nowhere near the almost $200 billion that will be required.  It is a staggering number, though Houston’s 2015 GDP was about $500 billion, so it therefore represents almost 5 months of Houston capital activity and formation.  It is therefore survivable.  By contrast, New Orleans 2005 GDP was about $80 billion, and approximately $60 billion in damage was incurred from Katrina.  If you want to think about these numbers in practical terms, think about the entire city of Houston working for five months, and at the end of five months having absolutely nothing to show for it as the capital was destroyed at the end.

Property insurance in Houston, already among the most expensive in the nation, is likely to rocket upwards even more, adding yet more financial burden to already reeling homeowners.  I am not looking forward to the renewal rates for my home.  The reaction by many homeowners may be to raise their deductibles or lower their coverages in order to better afford premiums, thereby even further transferring risk onto themselves.

Personal Experience

My heart goes out to anyone who flooded.  My family has vast personal experience with flooding.  My grandparents bought a wonderful modern home in the 1960’s, on South Braeswood right across from Braes Bayou.  The home provided wonderful times for visits and holidays.  Later, my parents would themselves buy and move into this home, and it was here that I grew up.  One day in 1983 as a high school senior and while traveling with my mother on the east coast to visit colleges, we got a call from my father who informed us that our house had flooded with a foot of water, ruining much.  I still remember how upset and traumatized my mother was – we cut our visit short and returned home.  Our home was fixed and we continued on with life, spending many more happy times there.

By the time Harvey roared out of the gulf, this home had flooded another three or four times, including twice recently in the Memorial Day and Tax Day floods.  My parents moved to higher ground in West University after the Memorial Day floods, and thankfully incurred no damage to their new home from Harvey (well, almost none – my dad accidentally left his four car windows cracked and in the driveway before departing for a three week vacation, but at least it’s progress). 

Harvey of course flooded the Braeswood house again up to four feet.  Abby and I drove over and looked at it after the water receded, drawn to see the latest indignity inflicted on this structure that held such quantity and force of memory.  I stood, yet again, in astonished silence, looking here and there at the soggy damage, and it made me sad.

Our homes should not make us sad.  They should places of joy, safety, and reliability.  And they should be those things especially in the face of storms.  If they are not, then like all investments, we should put aside our feelings and consider what is prudent.  My hope is that Houston and its people will now, finally, start to do just that.

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