Climate can affect housing costs, communities

Coming off a year of record-breaking storms and extreme weather events, people and communities are becoming increasingly aware of and vulnerable to the risks posed by a changing climate. Severe disasters like hurricanes, wildfires, and floods, as well as smaller-scale, chronic events like tidal flooding, are becoming more frequent. These conditions are presenting two major housing challenges to communities and local governments: impacts on housing affordability, as well as decreasing home values.

Climate change is affecting housing affordability

Housing affordability is already being affected by climate impacts. In many areas around the country, homeowners are facing repeated damage to their homes that often requires costly repairs. Homeowners in vulnerable locations will need to enhance their resilience by retrofitting their homes, but costs to do so can be out of reach for many homeowners. Those who cannot afford to repair and rebuild will continue to be forced out or remain in deteriorating conditions.

Homeowners in physically vulnerable areas are also facing rising insurance rates as the industry responds and protects itself from climate change impacts. Already, insurance companies in wildfire-prone areas of California and low-lying beachfront communities in Miami have begun to limit coverage for homebuyers or are declining to renew coverage for existing homeowners in high-risk areas. Increasingly high insurance rates will make coverage too expensive for some and can make home ownership impossible for potential buyers.

Home values are being affected by climate impacts

Increasing climate impacts are also threatening home values. For example, a 2019 analysis of real estate transactions across the East Coast and Gulf Coast states showed that frequent tidal flooding caused by sea level rise has resulted in a $15.9 billion dollar loss in home value appreciation in just the past 12 years. A downward shift in home values could also lead to a corresponding decline in tax revenue, meaning cities could have less resources to fund resilience measures that can protect communities.

Like insurance agencies, banks are also beginning to take note of the risks posed by climate change. With the potential for banks to see significant financial losses due to climate impacts, they may begin to decline mortgages for properties in high-risk areas. This will challenge home affordability and could further drive home value depreciation as well.

While the impacts of climate change will be widespread, low-income communities and communities of color are at significantly greater risk. In Miami, for example, higher-ground communities that are historically home to low-income communities of color, like Little Haiti, are becoming more attractive to real estate developers and potential buyers as they seek an alternative to flood-prone beachfront properties. As higher-income residents move into these communities, longtime residents could be priced out. This phenomenon is known as climate gentrification.

The path forward

To ensure accessibility and protection for potential buyers and current homeowners, significant action on resilience must be made at the local level. Resilience measures can help create better-prepared, safe, and affordable communities.

Efforts to make cities more resilient, such as building green infrastructure or supporting housing elevation projects, also risk increasing the value of neighboring homes. These changes can put low-income residents at risk of being pushed out of their neighborhoods. Therefore, it is critical that protections (such as caps on property taxes for longtime or elderly residents) are put in place at the local level to prevent this from happening.

Of similar concern is the inability of many low-income residents to leave higher risk areas. Lack of funds and support could potentially trap people in vulnerable homes and neighborhoods, creating safety and health hazards. Government support for housing retrofits and buy-outs in the highest-risk areas will be crucial to support these communities going forward.

Acting on resilience will also benefit the economic competitiveness of cities, which is affected by their ability to protect current residents and attract new businesses. Not taking resilience action early on could make it more challenging to do so later, once tax revenues are potentially drained by climate impacts.

If enacted, President Biden’s $2 trillion proposal to improve the nation’s infrastructure — which includes significant funding for transportation resilience as well as housing retrofits and nature-based infrastructure — would be a significant step forward in creating a more resilient future for our communities. Making significant funding available for cities to enact resilience measures will set them up not only to safeguard lives and public health, but to maintain housing affordability and home values that contribute to the accessibility and vibrancy of communities.