> In any case, your plan would destroy the land value, and the corresponding property tax revenue

Sounds like the market effectively discovered the true value of the property with all externalities priced in. I don’t see a problem here?

The problem is that the city relies on property tax revenues to function.

perhaps disaster prone areas shouldn't be worth a lot?

The value of the land has already been destroyed. What’s going on now is corrupt public subsidy.

Well, it would likely be affordable at least.

On the downside, when the next disaster hit and FEMA didn't cover it, it would look like FEMA doesn't want to cover low income housing, which isn't a good look.

But there does need to be some mechanism to convince people to abandon homes and towns that are not appropriate given environmental conditions. And it needs to be done carefully so it's not like kick all the poor people out, do some civil engineering that never happened while it was a poor community, then sell the land to developers who make a huge profit.

That is basically what governments are for, collective actions that make land more valuable: roads, schools, police, fire departments, and civil engineering projects.